TAP 04-012

EFTPS—Clarification of Tax Year

Statement of Issue:

The Electronic Federal Tax Payment System (EFTPS) payment instruction booklet, telephone and on-line payment systems do not differentiate between calendar and fiscal year-end taxpayers resulting in misapplied payments, inappropriate refunds, or both.

Proposal:

IRS should add instructions clarifying what is meant by tax filing year for both fiscal and calendar year filers at the time the taxpayer is prompted to enter this information, and add an instruction or prompt to existing instructions to identify “Fiscal Year-End Taxpayers”, as suggested below:

For Fiscal Year-End Taxpayers, [Enter 2 digits for Month Fiscal Year-Ends __.

Response Notes:

The IRS agrees that this is an issue that warrants further attention and will continue to explore ways to reduce the number of misapplied payments by fiscal year-end taxpayers. Scheduled Implementation: EFTPS is currently undergoing several major transitions. The system changes must coincide with printed changes in the Payment Instruction Books and other publications through TEC. The earliest estimated completion date is July 2004. However, this date is subject to approval and revision after review by Financial Management Services and our Treasury Financial Agent.

A clarification will be added to the next revision of the EFTPS Payment Instruction Booklet, along with a Help message for EFTPS-Online and the next revision of the EFTPS batch-software or what is meant by tax filing year.

IRS will also modify the voice response system to prompt taxpayers when the tax period appears to be inconsistent with the type of payment being made. Taxpayers will have the option of accepting or changing their payment information at that time. This additional service will result in an increase in the quality of the payment data.

However, IRS does not believe adding the instruction or prompt for "Month Fiscal Year Ends" will address the problem. When EFTPS was in its infancy, businesses were required to enter their two-digit tax period ending month. Feedback received indicated that fiscal year businesses were inputting the incorrect fiscal year-end month, resulting in errors and unpostable payments. Therefore, EFTPS has been programmed to generate the fiscal year-end month from the master file in order to reduce these errors.