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13–19 Pay Federal Taxes On-line
are most likely to prepare taxes and the likely time required to complete each
return. If the expected amount is too high, it may be useful to comparison-shop
against the rates of other tax preparation firms. It may also be possible to institute a
fixed fee for each tax return, thereby capping the expense. The other problem is that
there is some inefficiency in separating the tax filing work from the outside auditors
a company already uses. The reason is that the auditor must copy the work papers
and send them to the tax supplier, which is not only an extra expense, but also
slower than leaving all of the work with the auditor. Despite these problems, it is a
very good idea for a smaller firm to outsource the preparation of its tax returns.
Cost: Installation time:

13–19 PAY FEDERAL TAXES ON-LINE

There are a number of taxes that a company must pay to the federal government,
such as unemployment insurance, Medicare, Social Security, withheld income
taxes, and corporate income taxes. Since this can involve a substantial amount of
money, companies tend to wait until the last minute to deposit them, usually
through the local bank. If there is no one available to go to the bank to transfer
the funds to the government, or if the bank is closed for any reason, then the com-
pany will be penalized for late payments. This is a particular problem when only
a few people know how to make the deposits and they are unavailable for any rea-
son on the day when a payment is required.
These problems can be resolved by making on-line payments to the federal
government through its free www.eftps.gov site. This involves creating an account
with the government on-line through its “New Taxpayer Enrollment Form” and
then waiting up to 15 days for the IRS to mail a PIN number to you. Once
received, a company can then request an Internet password and submit tax pay-
ments at any time of the day or night, seven days a week. The government then
transfers the designated funds out of the company bank account. A printable con-
firmation is made available, which a company can retain as proof of payment to
the government. A transaction history is also available on-line for all payments
made within the last 120 days. It is even possible to schedule payments up to 120
days prior to a tax payment due date, so that the government can automatically
withdraw the required funds on a targeted date without anyone from the company
having to be present. Though the implication here is that payments are only
authorized through an Internet site, a company can also do this over the phone or
with downloaded PC-based software that uses a dial-up modem.
Once a company’s total tax remittances to the federal government exceed
$200,000 per year, it must use this system. If a company that is required to use the
system then chooses to make a manual payment with a tax coupon, it will be sub-
ject to a 10 percent penalty (though this does not apply to voluntary participants
that fall below the $200,000 threshold). Also, if a company pays taxes from a