Electronic Federal Tax Payment System: A Guide for Small Businesses

Taxes. One of only two certainties in life, according to Benjamin Franklin. And while paying taxes is obviously the most painful part of the equation, all of the administrative work attached to it can also cause a good old-fashioned migraine. Luckily, for individuals and business owners in the United States, the Electronic Federal Tax Payment System (EFTPS) helps to dull the pain ever so slightly by offering a quick and easy way to schedule and execute transactions. Here's everything you need to know about the EFTPS so that you can spend less time thinking about taxes and more time thinking about… anything else.

What is the Electronic Federal Tax Payment System (EFTPS)?

The EFTPS is a tax payment service that’s provided for free by the U.S. Department of the Treasury. It allows taxpayers—both individuals and businesses—to make payments directly to the IRS by telephone or online, and is accessible 365 days per year, 24 hours per day. The Electronic Federal Tax Payment System is used by individuals, businesses, nonprofits, and government organizations. It processes a variety of different types of tax payments, including:

• Estimated taxes
• Corporate taxes
• Self-employment taxes
• Payroll taxes, including Federal Insurance Contribution Act taxes
• Excise taxes on alcohol, gasoline, and certain other goods

All of these taxes can be paid via credit card (Via, Mastercard or Discover), ACH debit (direct deposit to your bank account, in the event of amounts owing), or wire transfer from your bank account. The EFTPs is an ideal option for individual and business entities who want a fast, convenient, and always-on way to schedule and pay their federal taxes. The system is secure, reliable, and offers great customer service all year round.

Why should a business use the EFTPS?

Convenience, speed, and reliability are the three biggest reasons that businesses choose to use the EFTPS. Additionally, it’s a tool that was created and managed by the U.S. government, meaning it’s as safe and secure as they come. More specifically, the benefits of using the Electronic Federal Tax Payment System for businesses include:

Pay all your taxes in one place

All taxes can be paid through the EFTPS, including personal income, employment, estimates, and excise taxes. You can pay taxes online, anywhere you have an interview connection, without having to go to multiple online or physical locations.

Simplify the accounting process

Bookkeeping and tax management for a business is difficult enough without having to worry about how and when to pay your tax obligations. The EFTPS makes the critical last step of payment quick and easy. This reduces time and costs associated with accounting and administration around tax time.

The Electronic Federal Tax Payment System is safe and secure

As a Department of Treasury-backed payment portal, the EFTPS employs government-grade cybersecurity protections to keep your payments and personal information safe. The government has taken major pains to ensure that this portal is secure. They’ve implemented a three-step authentication process for logging in, which includes using a PIN issued to you by the government, an 18-digit enrollment number, and your unique password.

Pay taxes and receive funds quickly

The EFTPS dramatically reduces delays in paying taxes and receiving returns. This is critical for businesses who are either tight of cash, or have fluid revenue streams and, therefore, tax obligations. Processing is fast, meaning businesses can take their time to ensure their accounting and tax management practices are accurate, and not rushed.

Schedule, change, and cancel payments as needed

Businesses can schedule payments up to 365 days in advance. For corporations, who are required to file tax installments each quarter, this ensures that payments are always on-time and predictable, ensuring that no obligations are missed. Schedule payments can be changed, canceled, and re-submitted at any time, giving a great deal of flexibility over personal accounting and outbound transactions.

Track payments with email notifications and payment history

All payments sent via the EFTPS will trigger email notifications, allowing you to track progress and receipt. Additionally, businesses have visibility into 16 months of payment history, with specific amounts and dates for each transaction. These records can be used to prove that payments were sent, if needed, and they can help to forecast future payment schedules and amounts. We mentioned this above, but it’s important to call out again. Businesses that operate as a corporation in the United States are required to deposit estimated income tax obligations electronically once per quarter. The EFTPS helps ensure these businesses meet this compliance requirement. Even better, those corporations can schedule installments in advance, ensuring that they don’t accidentally miss a deadline and incur penalties.

Why use the Electronic Federal Tax Payment System over Direct Pay?

A common alternative to the EFTPS is Direct Pay, a tax payment service offered by the IRS. While direct pay is a popular choice or tax payment, there is one caveat for businesses—this portal is only for taxes owed by individuals. It can’t be used for business tax payments of any kind. Because of that, EFTPS is the ideal choice for businesses looking to pay any type of federal tax online.

The steps to registering for and using the Electronic Federal Tax Payment System

If you’ve applied for an Employer Identification Number (EIN), chances are that you were automatically pre-enrolled to the EFTPS if you indicated that you'd be making federal payroll tax deposits. In this case, you likely received (or will receive) your EFTPS pin in the mail. If you didn’t, then you can request one by calling 1-800-555-3453. The PIN is what you’ll need to finalize your account setup on the EFTPS. If you’re not already enrolled, here’s a brief summary of the process:

1. Head over to EFTPS.org
2. Click “Enroll” and follow the instructions on screen
3. Submit your application
4. Once your application is received, you’ll receive your PIN via the U.S. Postal Service within five to seven business days
5. If you want to make a payment before the PIN is received, you can do so over the phone by calling 1-800-555-4477.

That’s the snapshot of how to apply. Let’s dig a bit deeper into the key steps below.

1. Gather everything you need to enroll

Enrollment for the Electronic Federal Tax Payment System only takes a few minutes, but there are some key pieces of information you’ll want in place before you apply. Make sure you have the following at hand: Business information, including:

• EIN
• Business name
• U.S. phone number
• International phone number

Contact information, including:

• Your name
• Country of operation
• Address and ZIP code

Financial information, including:

• Routing number
• Account number

Note: If you change bank accounts, you can update your banking information in the EFTPS by logging in and navigating to the FAQ section. Click on the “How do I change my banking information?” question and follow the instructions.

2. Select and submit enrollment at the Electronic Federal Tax Payment System website

Once you’ve navigated to the EFTPS.gov website, click on the “Enroll” button on the main screen. Select whether you’re applying as an individual or as a business, and fill in the appropriate information in the required fields. Click submit. If approved, you’ll be sent a PIN number in the mail. This PIN is required to set up your password and finalize enrollment.

3. Create a password and verify your banking information

When your PIN is received, follow the information on the document to finalize enrollment. Create a unique password and use this, and your PIN, to access your account via EFTPS.gov. Note: Keep this PIN somewhere safe. You’ll need it each time you login to EFTPS.

4. Start making payments

Login and click on the “Make a Payment” button. Choose the type of payment and the date that you want funds transferred from your account.

How Homebase helps you organize your online tax payments

While the EFTPS is great for managing payments, it still doesn’t help with all of the tax filing and bookkeeping that leads up to it. This is where a tool like Homebase can help. Homebase Payroll, for example, automatically calculates wages and taxes for your employees, and sends the correct tax paperwork at the deferral, state, and local levels. The platform can create, populate, and file hundreds of different tax documents across all 50 states, dramatically reducing the amount of paperwork that your team has to complete. In addition to tax forms, Homebase also calculates and withdraws all tax payments owned each time you send out payroll. It then can send those payments to the relevant agencies at the required frequency for your business. At the end of each quarter, your tax payments are consolidated and reported to the appropriate agency through tax filings. So, while a flexible payment system like EFTPS is great, a fully-automated payroll tax management system like Homebase is easier. Intrigued? Give it a try today.