TAP F04-062

Electronic Deposit of Payroll Taxes

Statement of Issue:

How can the number of small businesses and self-employed tax payers, who utilize electronic deposits, be increased?

Proposal:

The Committee recommended the following:

Education:

1. Continue to educate taxpayers in order to dispel the fears taxpayers have about electronic methods.
2. Educate and encourage tax professionals to utilize electronic methods.

Procedure:

1. Continue with innovative programs such as the Penalty Rebate Program and the EFTPS pre-enrollment of new small businesses.
2. Encourage the development of payroll software, which not only does payroll computations but also would electronically file and make payroll deposits.

While a number of the initiatives recommended are already underway, the committee identified new initiatives the Marketing Strategies Group plans to address.

1. Because older business owners appear the least interested in new processes, the Marketing Strategies group plans to explore opportunities for industry groups, with which Taxpayer Education and Communication partners, to identify industries and organizations that are likely to have older demographics. Once the information has been obtained, special messages for those market segments can be developed.
2. Interactive software training modules for the Electronic Federal Tax Payment System (EFTPS) are currently available on the Internet and on CDs available upon request from the IRS Distribution Centers.
3. Marketing electronic payments to tax professionals has been the key component of IRS’ marketing strategy for a number of years.
4. The Penalty Rebate Program was made available nationwide approximately one year ago. The Service is just at the point when it will be able to measure the impact of the program. If it is as successful as the pilot project, there is every expectation that the program will continue.
5. The EFTPS Pre-Enrollment Program appears to have been very successful in promoting the use of EFTPS among new business owners, with approximately 30% of the new businesses completing the registration process and making payments electronically. If that success is validated through further research, it can be expected that the program will continue as a key part of the e-pay strategy.
6. Encouraging payroll software developers to include e-file and e-pay in their software products has met with limited success in the past. However, a new effort is in the planning stage, one that will focus on the market for such products and the marketing opportunities available through partnering with the IRS.