This chapter guides financial institutions that process Federal tax collections using the Electronic Federal Tax Payment System (EFTPS).
The Treasury Financial Manual (TFM) binds financial institutions that accept or originate Federal tax payments. Those institutions also are bound by applicable Federal Reserve Bank (FRB) operating circulars that supplement regulations at Title 31 of the Code of Federal Regulations, Parts 203 and 380 (31 CFR 203 and 380). Users may access Volume IV on the Financial Management Service's (FMS's) Web site at http://www.fms.treas.gov/tfm/vol4/index.html.
Title 31 CFR 203 and 380 govern:
See TFM Volume IV, Part 1, Chapter 2000, for definitions.
EFTPS provides an electronic alternative to the Paper Tax System (PATAX). It also enables taxpayers to report Federal tax payments and deposits to the Government using electronic reporting methods. Using EFTPS, taxpayers may transfer their payments or deposits using electronic funds transfer (EFT) technologies.
Financial institutions and depositaries have an integral role in the tax collection process. With EFTPS, a financial institution or depositary chooses the extent to which it will service its customer's Federal tax payment needs.
Financial institutions and depositaries may provide the following electronic services to meet their customers' Federal tax payment needs:
For Internal Revenue Service (IRS) audit purposes, a taxpayer may seek proof of a timely funds transfer from its financial institution. If requested by the taxpayer, financial institutions must provide information such as:
To further assist customers, financial institutions should use the term "USATAXPYMT" or otherwise clearly identify EFTPS payments on customer account activity statements.
The TFA does the following:
The FRB, as Treasury's fiscal agent, provides a same-day payment mechanism for the EFTPS. This is called the Federal Reserve-Electronic Tax Application (FR-ETA). FR-ETA uses the FRB funds transfer system for same-day payments. The FRB does the following:
Treasury requires that all EFTPS taxpayers enroll with the TFA before making an electronic Federal tax payment via ACH debit or credit.
Taxpayers who change financial institutions or depositaries, or who change their accounts within a financial institution or depositary, may edit their banking information with their TFA. This may be accomplished by touch-tone phone, EFTPS Online (https://www.eftps.gov), or by submitting a Confirmation Update form to the TFA.
Taxpayers may obtain enrollment forms:
At the request of a taxpayer that selected ACH debit as a funds transfer method, a financial institution or depositary must verify the accuracy of the financial institution's routing transit number (RTN) and the taxpayer account number and account type indicated on the enrollment form. The taxpayer must ensure the completed enrollment form gets to the EFTPS enrollment processing center. The financial institution or depositary may offer this delivery service to its customers.
The TFA may originate a prenotification entry to the account indicated by the taxpayer on the enrollment form for taxpayers that select ACH debit as their payment method.
Upon receipt of a prenotification entry, the financial institution or depositary verifies the taxpayer's account number and account type. If the taxpayer's account number and account type are correct, the financial institution or depositary takes no further action. However, if the account number and/or account type are incorrect, the financial institution or depositary must initiate a return or notification of change (NOC) entry to Treasury's account within 6 banking days of receipt of the original prenotification entry.
Treasury may impose an interest assessment against a financial institution or depositary that fails to respond to an incorrect prenotification entry. It assesses interest for the lost value of funds resulting from live ACH debit payments returned because of incorrect account numbers or account type information. Refer to Section 2250 for interest calculation information.
A financial institution or depositary may establish conditions the taxpayer must satisfy before it will effect the electronic tax transaction. For example, a financial institution or depositary may specify a cutoff time for receipt of a customer's Federal tax payment instructions. If conditions are not satisfied, the financial institution or depositary may return an ACH debit entry and/or refuse to originate an ACH credit entry or a same-day tax payment.
There are operating risks for financial institutions or depositaries that process EFTPS payments and deposits using ACH credit and same-day payment and deposit methods. For example, Treasury may assess a financial institution or depositary interest for an incorrect ACH credit entry or same-day payment (see Section 2250). The financial institution or depositary does not encounter these risks with ACH debit transactions. The financial institution or depositary should establish guidelines consistent with the level of risk it is willing to assume.
A financial institution or depositary should publish, or otherwise make available to its customers, the guidelines it uses when originating ACH credits and/or same-day Federal tax payments. At a minimum, these guidelines should identify the following:
EFTPS supports two future-day payment mechanisms: ACH debit and ACH credit. Any financial institution or depositary capable of originating and/or receiving ACH transactions, itself or through a correspondent, may offer these services to its taxpaying customers.
For ACH debit payments, the taxpayer or the taxpayer's agent reports the Federal tax payment information to the TFA using one of the available EFTPS reporting methods. The TFA conducts on-line, real-time editing and validation of the Federal tax payment information. It issues the taxpayer an acknowledgment or EFT number to confirm a timely deposit report. The TFA originates the ACH debit entry to the taxpayer's account 1 business day prior to the settlement date designated by the taxpayer.
Refer to subsection 2230.30 for ACH debit prenotification instructions.
An RDFI does the following:
An RDFI also uses an NOC when a merger results in changes to the financial institution's RTN and/or the customer account number or type of account.
ACH debit, through EFTPS, offers taxpayers a warehousing capability. Warehousing provides taxpayers the ability to schedule, as soon as the amount is known, future deposits or payments for settlement on the due dates. This feature eliminates the taxpayer burden of remembering to initiate a deposit 1 business day before the tax due date. Using this warehousing capability, business taxpayers may schedule a future-day settlement up to 120 calendar days in advance. Individual taxpayers may schedule a future-day settlement up to 365 calendar days in advance. Taxpayers are encouraged to use the warehousing capability of EFTPS whenever possible.
Consistent with standard ACH rules and guidelines, the TFA or RDFIs may take the following actions:
The RDFI should identify Federal tax payments on a customer's statement. For example, the RDFI may use the term, "USATAXPYMT," available in field 7 (company entry description field) of the ACH company batch header record.
For ACH credit payments, the taxpayer's financial institution originates an ACH credit entry to Treasury's account at the FRB. The ACH credit addenda record contains the Federal tax payment detail. The FRB transmits the payment detail to the TFA for validation and transmission to IRS.
(1) Zero-Dollar Entry With Tax Payment (TXP) Addenda Record or Prenotification Entry With TXP Addenda Record-At the taxpayer's request, a financial institution or depositary originates either:
The TFA's account information is:
(2) Return of a Zero-Dollar or Prenotification Entry-The TFA reviews all zero-dollar and prenotification entries. If the entries contain incorrect taxpayer information (for example, the TIN in the entry detail record is missing or invalid) or if the taxpayer is not enrolled in EFTPS, the TFA returns the entry to the originating depositary financial institution (ODFI). The TFA must return the zero-dollar entry so it is available to the ODFI no later than the opening of business on the second business day following the settlement date of the original zero-dollar entry. The TFA must return the prenotification entry so it is available to the ODFI no later than opening of business on the sixth business day following the settlement date of the original prenotification entry.
The taxpayer's financial institution carefully reviews and makes any necessary corrections to the information before originating another zero-dollar or prenotification entry. The financial institution or depositary may contact the EFTPS TFA help line for assistance. The TFA help line number for financial institutions, as of the date of this document, is: EFTPS Bank of America, 1-800-605-9876.
(3) Failure to Originate a Zero-Dollar or Prenotification Entry-Treasury may assess interest to a financial institution or depositary that fails to originate a zero-dollar or prenotification entry at a taxpayer's request, causing a future ACH credit entry(s) to be returned. Refer to Section 2250 for interest calculation information.
(4) ODFI Responsibilities for Originating an EFTPS ACH Credit-An ODFI must originate ACH credit entries at least 1 business day prior to the date the taxpayer requires the payment to settle. It originates the payment using the cash concentration or disbursement ACH format with TXP addenda record (CCD+TXP) banking convention to the appropriate Treasury RTN and account number.
(5) Tax Payment Identification-The ODFI should identify Federal tax payments on a customer's statement. For example, the ODFI may use the term, "USATAXPYMT," available in field 7 (company entry description field) of the ACH company batch header record.
(6) ACH Credit Corrections-Consistent with ACH rules and guidelines, the following ACH credit corrections are permitted:
(7) Notification of Change-The TFA may originate NOC entries, when needed.
The FRB provides electronic same-day payment for the deposit and payment of Federal taxes via Fedwire® value (Typecode 1000) transfer.
The Fedwire® application has a preformatted screen for entering taxpayer detail, via FedLine®, containing built-in edits for tax information.
Financial institutions may obtain detailed information on format, reversal procedures, adjustments, and interface with the investment program at http://www.frbservices.org/Treasury/pdf/Sameday.pdf or from the FR-ETA Customer Service Unit (1-800-382-0045).
A financial institution must send same-day Federal tax payments so that FR-ETA receives them no later than 5 p.m. eastern time (ET). FR-ETA will return deposits received after 5 p.m. to the originator. The taxpayer, financial institution, or depositary may be assessed a late fee for returned tax payments if it results in tax payments not made in a timely manner.
Fedwire® value tax payments settle immediately in the Fedwire® system. It debits the financial institution's reserve account and credits Treasury's account the day of the transfer. Fedwire® passes value information to TIP. TIP reinvests these monies with Investor and Retainer depositaries with capacity.
The Fedwire® value tax payment uses a specific format and a customer transfer (CTR) product code. Fedwire® value message fields 4200, "Beneficiary," and 6000, "Originator to Beneficiary Information," provide tax payment detail. Contact the FRB's Electronic Payments Customer Support Staff or the FR-ETA Customer Service Unit for detailed format information.
Contact the FR-ETA Customer Support Unit for reversal procedures or see the FR-ETA "Guidelines for Making EFTPS Same-Day Federal Tax Payments" available on the Web site at http://www.frbservices.org/Treasury/pdf/Sameday.pdf.
A financial institution may correct erroneous same-day Federal tax payments by reversing the entire erroneous transaction and, if applicable, initiating a corrected transaction before 5 p.m. ET on the settlement date. The reversal must be for the total dollar amount of the original transaction. Contact the FR-ETA Customer Support Unit for additional information or see the FR-ETA "Guidelines for Making EFTPS Same-Day Federal Tax Payments" available on the Web site at http://www.frbservices.org/Treasury/pdf/Sameday.pdf.
If a financial institution requests a reversal of a Fedwire® value transaction before the 5 p.m. ET cutoff, FR-ETA will return the funds to the originating institution. If applicable, the financial institution should initiate a corrected Fedwire® value payment before the 5 p.m. ET cutoff.
Financial institutions can reverse transactions up to 5 business days following the date of the original transaction. They should direct subsequent requests to IRS.
Financial institutions direct requests for adjustments made the same day but after the 5 p.m. ET cutoff to the Treasury Support Center (TSC) as soon as possible. They should provide an explanation of the error and request an adjustment.
The FRB may reject a same-day Federal tax payment for the following reasons:
The IRS may return a same-day Federal tax payment because of an overpayment.
The financial institution or depositary must notify its customers in a timely manner of a rejection or reversal that results in a deposit or payment not settling on the taxpayer's requested settlement date.
Treasury may charge a financial institution or depositary for the value of delayed Federal tax payments. It may assess this charge if the taxpayer meets the financial institution's or depositary's conditions for making an EFTPS deposit or payment (Sections 2230 and 2235), and the financial institution or depositary fails to process the payment properly. Treasury assesses interest from the date the Federal tax payment should have settled to the TGA to the date the payment actually settled to the TGA. Treasury assesses a financial institution or depositary interest to recoup the earnings value of funds lost. It computes the penalty using the interest rate factor for penalties under EFTPS.
Treasury assesses interest from the day the taxpayer specified settlement to Treasury until receipt of the payment by Treasury. It determines the assessed interest by multiplying the total delay in 1-day funds for the cycle(s) by the daily interest rate factor for penalties (under EFTPS) for each week of the corresponding TT&L cycle(s).
The TSC, at the direction of FMS, debits the financial institution's or depositary's reserve account, or the account of its designated correspondent, for the amount of the penalty.
Financial institution and depositary liability is subject to the following limitations:
The limitation of liability applies only to any interest assessment in which there is unauthorized use, indication of fraud, presentment of a false claim, or misrepresentation or embezzlement on the part of the financial institution or depositary, or any of its employees or agents.
A financial institution or depositary must not originate an ACH entry that results in an unauthorized debit to the TGA.
A financial institution or depositary that originates an unauthorized ACH entry to debit the TGA is liable for the amount of the transaction and charges. Treasury determines the interest charge by multiplying the amount of the unauthorized entry for each calendar day by the interest rate. It calculates the interest charge from the date the TGA was debited to the date the TGA was credited.
According to 31 CFR 210.8(b)(1) (Federal Government Participation in the Automated Clearing House), there is no limitation of liability, either time or amount, for unauthorized ACH entries to the TGA. This does not preclude any other sanctions.
The TSC, at the direction of FMS, debits the financial institution's or depositary's reserve account, or the account of its designated correspondent, for the amount of the charge.
A financial institution or depositary may appeal any penalty or charge imposed under Section 2250 by contacting the TSC.
A financial institution or depositary dissatisfied with an appeal decision from the TSC may make a final appeal to FMS. FMS must receive the written final appeal no later than 90 calendar days following the date of the charge or assessment, or 90 days from the date the FRB declined the initial appeal. In its final appeal to FMS, the financial institution or depositary must include appropriate and sufficient documentation to justify a reversal or reduction of the assessment or charge. Send the final appeal to the address listed on the Contacts page.
The Director of FMS's Tax Collection Division will review appeals within 45 calendar days of receipt. FMS, however, may unilaterally extend the deadline for issuing a decision by providing the financial institution or depositary with written notice of the extension that includes an anticipated final ruling date. FMS will advise the financial institution or depositary, in writing, of the Director's ultimate decision, whether it is to uphold the assessment or charge, reverse the assessment or charge, or mandate another action. The Director's decision is final.
In the event of an over recovery or under recovery of the assessment or charge, Treasury will reimburse the financial institution or depositary by instructing the FRB to credit or debit the reserve or clearing account of the financial institution or depositary, or the account of its designated correspondent, as appropriate.
Tax Collection Division
Federal Finance
Financial Management Service
Department of the Treasury
401 14th St., SW.
Washington, DC 20227
Telephone:
202-874-4288 (Tax Collections)
202-874-7150 (Investments)
1. Purpose
This transmittal letter releases Treasury Financial Manual (TFM) Volume IV, Part 1, Chapter 2200: Federal Tax Collections Using the Electronic Federal Tax Payment System. This chapter guides financial institutions that process Federal tax collections using the Electronic Federal Tax Payment System.
2. Page Changes
| Remove | Insert | |
| IV TFM 1-2200 (T/L 6) | IV TFM 1-2200 | |
| Table of Contents for Part 1 (T/L 7) | Table of Contents for Part 1 |
3. Effective Date
This transmittal letter is effective immediately.
4. Inquiries
Direct questions concerning this transmittal letter to:
Tax Collection Division
Federal Finance
Financial Management Service
Department of the Treasury
401 14th Street, SW., Room 507
Washington, DC 20227
Telephone: 202-874-6590
Date: January 4, 2008
Judith R. Tillman
Commissioner