IRS raises threshold for electronic payment

Nation's Business, Sept, 1997 by Joan Pryde

If you're among the business owners with less than $50,000 in annual federal employment-tax deposits who were supposed to begin participating in the Electronic Federal Tax Payment System in 1999, worry no more: The Internal Revenue Service has taken you off the hook.

The agency announced July 11 that it is scrapping a rule under which businesses with employment-tax deposits of $20,000 to $50,000 in 1997 would have been required to use electronic means to deposit those levies and withheld income taxes in 1999.

The requirement was not changed, however, for firms above the $50,000 thresh-old. Such firms were to be using electronic means for payroll-tax deposits by July 1, but they had been granted a moratorium by the IRS on noncompliance penalties through Dec. 31. A provision in the tax package enacted in August extends that moratorium through June 30, 1998.

Although companies that have less than $50,000 in tax deposits and that expect to stay there can forget about the electronic-payment system, growing companies must stay alert. The regulations require firms that exceeded $50,000 in tax deposits during 1996 to start depositing electronically in 1998. If a company passes the $50,000 threshold in 1997, it must start making electronic deposits in 1999.