Properly calculating and paying your taxes is an essential element of running payroll for your small business. Whether you outsource to a payroll company, do it yourself, pay an employee to do it in-house, or hire an accountant, registering with the IRS’s Electronic Federal Tax Payment System (EFTPS) is a key step in the process.
EFTPS tax payments are a convenient, secure way for your small business to pay its federal taxes. But in order to make use of the EFTPS system, you’ll need to give yourself a bit of time and follow the correct steps. Let’s dive into what the Electronic Federal Tax Payment System is, go through the steps of EFTPS enrollment, and learn what to watch out for as a EFTPS user.
What is the Electronic Federal Tax Payment System?
The Electronic Federal Tax Payment System (the EFTPS) is a free tool from the U.S. Department of the Treasury that processes secure tax payments online via direct debit from a bank account. It’s used for both owed and estimated federal taxes.
How does the EFTPS work?
The Electronic Federal Tax Payment System lets taxpayers file directly with the IRS, depositing taxes both from employee check withholdings and from a business. But this can only happen after correct EFTPS enrollment, a process that can take up to a week.
After the initial online registration, a physical piece of mail is sent to the address you provide. This verifies the bank account details for your debit payments and give you a unique personal identification number (PIN). You’ll need this personalized PIN number, along with your Taxpayer Identification Number (TIN), to finish registering.
Once you’re enrolled, the EFTPS system lets you make tax payments 365 days a year, 24 hours a day, online or by telephone. Bear in mind that if EFTPS isn’t working correctly or is temporarily unavailable, you still meed make your payments on time, whether in person or through the mail—on-time filing remains your responsibility, so don’t leave it ’til the last minute.
Who uses the EFTPS and why?
Over 12 million individuals and groups use the Electronic Federal Tax Payment System every year to process their secure federal tax payments. From businesses to nonprofits to other organizations, the EFTPS is an appealing method of interacting with the IRS, ideal for its no-cost convenience and security.
Corporations use the EFTPS since they’re already required to required to deposit their federal taxes electronically (including employment tax deposits, excise tax deposits, and corporate income tax deposits). Businesses can also pay their income, payroll, and other federal taxes electronically. Across the board, using the EFTPS is the easiest way to handle these transactions.
Payroll service providers and other authorized third parties also use the EFTPS to make payments on behalf of businesses.
What are the benefits of using the Electronic Federal Tax Payment System?
As a small business owner, you have good reason to consider setting up an EFTPS account. The benefits of using the Electronic Federal Tax Payment System include the ability to:
- Pay taxes online from your home, office, or any location with internet access, 24/7
- Schedule payments ahead of time (up to 365 days in advance) so deadlines aren’t missed
- Use a secure government system that protects your sensitive financial information with three-factor authentication
- Get notified after you make a payment: receive an email as soon as your payment goes through, or receive notification by mail
- Keep track of your payment history: check online to see your payment history from as far back as 16 months
- Pay all your federal taxes in one place, including income, employment, estimated, and excise taxes
Are there any downsides to registering with the EFTPS?
While there are a ton of benefits of the Electronic Federal Tax Payment System, a potential hiccup can be the length of time needed for the registration process. You’ll need to account for the wait time—five to seven days for your PIN to arrive at your IRS-registered address—before you can begin using the system as an enrolled user. If you need to make a payment before you’ve received your PIN, you’ll have to give them a call.
In addition to paying your taxes on time, it’s also up to you as a business owner to submit the correct amounts. To make sure your payroll tax responsibilities are met accurately, you may want to opt for professional tax services and have them submit to the EFTPS on your behalf.
EFTPS versus Direct Pay: what’s the difference?
You may have heard of the IRS’s other electronic payment tool, Direct Pay, and wondered which system is appropriate for you. The difference between EFTPS and Direct Pay is a pretty simple one.
While Direct Pay is only available to individuals, both individuals and business owners can pay federal taxes using EFTPS. For your small business, Direct Pay may not be the best choice for making your small business tax payments for the following reasons:
- Direct Pay doesn’t save your personal information; so reentering it every time you use it is a must
- Direct Pay only allows you to pre-schedule payments 30 days in advance, and only one payment can be scheduled at a time
- Direct Pay caps the amount of money that can be sent to the IRS, limiting you to two payments within a 24-hour period. Each payment must be less than $10 million
- Direct Pay is only available Monday through Saturday from midnight to 11:45 p.m. ET, and Sunday from 7 a.m. to 11:45 p.m. ET
How to enroll in the EFTPS
If you’re a new business, you were probably pre-enrolled automatically in the Electronic Federal Tax Payment System. You probably received a letter sent to your business address that contains your PIN (if you didn’t receive this letter, you can get one by calling 800-555-3453).
Haven’t yet enrolled? Now’s a great time! Follow the steps below to start saving yourself time.
- Visit the official EFTPS site, EFTPS.gov
- Submit the following information:
- Your Taxpayer Identification Number (TIN)
If you’re enrolling your business, provide your Employer Identification Number (EIN). If you’re a business owner enrolling individually so you can pay your income taxes and make estimated tax payments, use your Social Security number (SSN).
- Your business name and address as they appear on your IRS tax documents
If you’re using EFTPS to deposit payroll taxes, for example, this would be your business name and address.
- Your contact information and phone number
- Your bank account number and nine-digit routing number
- Your Taxpayer Identification Number (TIN)
- Wait 5 to 7 days for approval: a PIN will arrive via mail
- Use the PIN to create an online account, choosing your login name and password (each time you use the EFTPS going forward, you’ll need both your PIN and password)
- Start making or scheduling your tax payments
Making your initial EFTPS tax payment is simple. Just log on to the site, select the “make a payment” option, and follow the instructions. Choose the type of payment, then select the date you want your funds transferred. Once the transaction is complete, you’ll receive a confirmation number, which you should print out for your records.
Be aware that the payments you make through the EFTPS aren’t usually processed the same day. So if you’re on a payment deadline, contact the IRS to arrange for a same-day wire payment. If you’ve pre-scheduled a payment, you can make changes or cancellations up to two days prior.
How to detect and avoid EFTPS scams
The Electronic Federal Tax Payment System is exclusively a payment system. The government doesn’t have access to your bank account or know what’s there. It also can’t remove any additional funds to satisfy outstanding taxes. The only thing that can be processed are your explicitly authorized payments.
Outside of the EFTPS website, though, be aware that phishing scams exist in the form of fraudulent emails targeting EFTPS users.
Keep an eye out for emails telling you that your identification number has been rejected, followed by a link to change your number. There’s a good chance it’s a scam, and the link contains malware. Malware will likely intercept your banking info and cause a huge headache. If you receive this type of suspicious email, ignore it and contact the EFTPS to let them know.
Simplify payroll taxes and more with Homebase
Running payroll as a small business owner is complicated and time-consuming. It involves so much more than just figuring out wages and transferring payments. Calculating and withholding taxes, making payments on time, staying compliant with federal, state and local laws… All essential parts of running your payroll right. And you have to do all these things while actually running your business.
If it’s your first time running payroll, or it’s been a while since you’ve had an employee, it can feel daunting getting up to speed. There are so many steps involved in carrying out the payroll process on your own. It’s a lot to keep a handle on; especially if you don’t have an HR service to help.
Payroll software specifically designed for small businesses can help enormously. With the right software, you’re saved the headache of having to remember every single payroll step yourself and running the risk of missing a payment or falling out of compliance, even accidentally.
If you’ve been feeling the need for help, check out Homebase Payroll.
Homebase offers an online payroll service that automates your payroll process and syncs automatically with your time tracking and scheduling. From converting your timesheets into hours and wages to automatically processing your tax filings, Homebase takes care of everything:
- Calculate wages and taxes and send out correct payments to employees, the state, and the IRS
- Automatically process your tax filings and issue 1099s and W-2s
- Store your time card records to help you stay compliant with FLSA record-keeping rules
With Homebase doing the heavy lifting for you, you can get back to growing your business and put your focus where it matters. Start for free today.
Electronic Federal Tax Payment System FAQs
What is the Electronic Federal Tax Payment System used for?
The Electronic Federal Tax Payment System (EFTPS) is used to make secure online tax payments to the federal government, both owed and estimated, via direct debit from a bank account. The EFTPS is provided by the U.S. Department of the Treasury and is free to registered users.
Is the Electronic Federal Tax Payment System safe?
Yes, the EFTPS is administered by the U.S. Department of the Treasury, and has been in operation for more than 20 years. The EFTPS site is extremely secure, complete with internal security policies and firewalls, preventing unwanted and unintended parties from gaining access to users’ financial information. A three-step authentication process is required to use the system, and the EFTPS will send emails only to those who have requested email confirmation.
What payments can be made via EFTPS?
Electronic Federal Tax Payment System (EFTPS) users can pay estimated, corporate, self-employment, excise and payroll taxes through the secure electronic system. Payments can be scheduled up to 365 days in advance and have no maximum amount.
Is the EFTPS mandatory for businesses?
Using the EFTPS is not required for businesses, although corporations must pay their federal taxes electronically. Individuals and smaller businesses have the option of sending checks, money orders or cash to the IRS.