IRS to Require Small Businesses to Pay Taxes Electronically in 2011

Prior to 2011, businesses with less than $200,000 of aggregate federal income tax, employment tax, excise tax, and etc. could pay their taxes to the government by depositing a check with a commercial bank using the Federal Tax Deposit paper coupon, Form 8109.  Beginning in 2011, all businesses (except those with less than $2,500 of quarterly tax deposits) must pay their taxes using the Electronic Federal Tax Payment System (EFTPS).  Registration with the EFTPS is required, and can take several weeks to complete.  Businesses that are currently using the paper deposit method should register at www.eftps.gov before the end of 2010 so that there is no delay in making tax deposits and incurring substantial penalties.  Failure to use EFTPS when required results in a "failure-to-deposit" penalty of up to 15% of the amount required to be electronically deposited, even if the taxes are timely paid by paper.  Payments made using the EFTPS must be scheduled by 8:00 p.m. ET at least one calendar day prior to the tax due date.  The payment is made by debiting the business' bank account registered with EFTPS.  I have found the EFTPS to be convenient and that its use helps reduce errors on the part of the government when processing tax payments.  If you are not already using EFTPS, you should consider using it for the balance of 2010.