FEDTAX II

Background

In the early 1990's, to manage the electronic payment of payroll and withholding taxes by federal agencies, FMS worked with the IRS to design and administer a system known as FEDTAX. FEDTAX automated the payment of taxes by federal agencies and the filing of Form 941 (Employer's Quarterly Federal Tax Return). FEDTAX has performed well since its implementation in 1993; however, the aging system required a number of technological enhancements to meet the challenges of the new millennium. Therefore, FMS decided to develop an entirely new system to be known as FEDTAX II.

Functionality

FMS and IRS partnered with Bank of America (formerly NationsBank), a Treasury Financial Agent, to customize a windows based, off-the-shelf software product which would be user friendly and meet the needs of the federal agency users and the Government. FEDTAX II provides federal agencies with a single system interface that allows for electronic payment of federal withholding taxes and filing of the Form 941 Employer's Quarterly Federal Tax Return.

Agencies access the FEDTAX II system through the World Wide Web or through a Virtual Private Network (VPN) using a local dial-up telephone number. Once a federal agency user has logged into the system with a user ID and password, FEDTAX II offers a consistent look and feel regardless of the mode of access. The Web allows FMS to deploy FEDTAX II in a manner that is least intrusive to agencies' computer and network configurations, while a VPN is an alternative to agencies unwilling or unable to use the Internet.

Funds Settlement

Funds settlement occurs between the account of the paying federal agency and the IRS, at 8:00 p.m. Eastern time every business day. While the IRS is in fact being credited with the amount of the various federal agencies' tax payments, funds never actually pass though the banking system. Instead, FEDTAX II creates a debit voucher for each Agency Location Code/Employer Identification Number having reported federal tax payments for a given day. A deposit ticket, summarizing the total payments made for a given day is created for the IRS. The debit voucher and deposit ticket information is reported to Treasury through CA$HLINK II, which results in an accounting entry into the central accounting system of the United States.

Form 941, Employer's Quarterly Federal Tax Return

In addition to effecting tax payments to the IRS, FEDTAX II produces a Form 941 filing based on payments made throughout the quarter, for the agency's final review and approval. Instead of printing and signing a paper 941 to be mailed, the FEDTAX II system generates an electronic version for transmission to the IRS. Using a Personal Identification Number (PIN) code specifically issued by the Internal Revenue Service for this purpose, the federal agency "signs" the return on-line with the PIN and transmits the Form 941 to the FEDTAX II system. FEDTAX II in turn creates the electronic version of Form 941 using ANSI X12 EDI standards, and transmits it to the IRS. The IRS is then able to verify the PIN and accept or decline the return.