Hello and welcome to lesson three.
This is a lesson for all small business owners.
At the end of this lesson you will be able to describe IRS e-file for your individual and business returns, list the benefits of IRS e-file for your individual and business returns, describe the electronic payment options and determine which programs you can use in your business.
If you are one of the millions of taxpayers who filed their personal income tax returns using IRS e-file then you're already aware of the countless benefits electronic filing provides.
With IRS e-file you can spend less time on taxes and more time focused on your business.
Everyone can benefit from e-filing their 1040 and the majority of taxpayers have discovered the advantages.
We hope you're one of them.
If you've never e-filed and need additional information check out www.aboutefile.gov.
You'll find all the information you need to get started.
You may even be eligible to e-file your federal returns for free through an IRS partner.
Check out irs.gov when you're ready to file your taxes.
Hi, I'm Jenny and like you I own my own business.
I started my own in home one person daycare a couple of years ago.
I decided then that I needed to know more about owning a business so I searched the web for information.
I knew I needed to know more about taxes so I checked out the IRS web site.
Turns out they have a small business tax workshop just for new businesses.
They even have a page with all the scheduled workshops in the country so I signed up for a workshop put on by an IRS partner and learned all about e-filing, and you know what?
What they say is true.
e-filing is easier, faster, and more accurate.
And if you get a refund or you qualify for the earned income tax credit, you get your money in days instead of weeks.
What's not to like?
I've been e-filing ever since.
The most common business forms are all available for e-file, including employment taxes, partnership returns, information returns, corporate returns, and charities and non-profits.
Let's talk about the benefits of filing your 1040 electronically.
First, it's convenient.
You get fast, electronic acknowledgement that IRS received your return.
If you have errors you get easy to understand error messages in plain language.
Tax preparation software performs your calculations and highlights needed forms and schedules.
You can buy your own software or you can choose a tax preparer who is an authorized IRS e-file provider.
And signing your return, it's simple and electronic.
You choose your own five digit personal identification number or PIN to sign your return.
E-filing is accurate.
There are fewer risks of math errors and of receiving a letter from the IRS and finally e-filing is safe.
Your tax information is secure.
Only authorized IRS employees have access to the system.
When you do your form 1040 electronically you'll complete a schedule C to show your business income.
Schedule C is included in all the 1040 software packages so there's no need to purchase additional business tax software.
This software does all your math and it even figures depreciation for you.
And if you use a tax preparer, their software will take care of everything too.
Now that you've learned about filing your taxes electronically, let's talk about paying electronically.
There are two electronic ways to pay.
Electronic funds withdrawal, and the electronic federal tax payment system.
When you e-file you can pay your taxes at the same time.
There is no charge and no enrollment procedure.
You just enter your bank routing numbers, your bank account number and the account type you want the payment withdrawn from.
For example, savings or checking.
This is instantaneous.
Electronic funds withdrawal is a great way for you to pay money you still owe when you file your taxes.
When you use EFW you authorize the US Department of Treasury, through a treasury financial agent to transfer money from your bank account to the treasury account.
The payment date is the same as the date the balance due return is filed.
Electronic funds withdrawal, EFW payments are withdrawn in a single transaction, not installments.
You can call the treasury financial agent toll free at 1-888-353-4537 to inquire about payments.
Wait at least five days after filing the return before making inquiries.
Contact the IRS immediately at 1-866-255-0654 if there is an error in the amount withdrawn.
As I mentioned earlier, the electronic federal tax payment system or EFTPS is one of the two ways you can pay your personal and business taxes.
EFTPS is especially useful to business taxpayers with employees because it makes it easy for you to make federal tax deposits.
But don't forget your own quarterly estimated taxes.
You'll learn all about employment taxes in lessons six and seven.
After you complete the employment tax lessons you may want to come back and revisit some concepts in this lesson.
You're probably wondering what the benefits are to using EFTPS.
There are many benefits including: complete control of all payments, you decide when to make a payment; scheduled payments when you want; you receive an immediate confirmation of every transaction so you know your instructions were received.
You can access 16 months of EFTPS payment history online or by phone.
It reduces paperwork.
It's safe, secure, and private.
It's convenient and available 24/7.
It's accurate, the error rate for electronic payment is much lower.
You can use EFTPS to pay all of your federal taxes including income, employment, estimated, and excise tax balances, payroll taxes, we call this federal tax deposits, FTD payments.
Quarterly estimated tax payments and installment agreement payments.
Let's see how easy it is to do it then I'll tell you how you can participate.
Most businesses receiving a new employer identification number are automatically pre-enrolled in EFTPS.
You will also receive a separate mailing containing instructions for activating your EFTPS enrollment.
If you are not automatically enrolled in EFTPS you can easily enroll yourself at www.eftps.gov.
Once you activate your EFTPS enrollment you can make payments by phone.
You can make payments immediately online or by phone if you choose.
To obtain an internet password and not to have your bank account information verified.
If you want your bank account information verified it takes an additional six days for completion of the verification process.
Once enrollment has been completed, EFTPS will send a confirmation update package which includes a step by step payment instruction booklet.
You'll get a personal identification number, PIN, under separate cover.
You can begin making payments when you receive your PIN.
There are two primary EFTPS methods.
EFTPS, direct, online or phone, and EFTPS through a financial institution.
EFTPS direct is an electronic payment method that allows you to access EFTPS directly to pay your taxes.
On the date you indicate EFTPS moves the funds from your account to the treasury's account.
Funds will not move from your account until the date you indicate.
In the EFTPS, through a financial institution method, you instruct your financial institution to electronically move funds from your account to the treasury's account.
However, not all financial institutions offer this service.
Before selecting this option, check with your bank to see if they offer this service, how much it costs,and if you are eligible to use it.
Some businesses contract for payroll services.
If you choose to allow your payroll company to make tax payments on your behalf, check with them for specific fees, deadlines, and instructions for enrollment in EFTPS.
If your payroll company is not making all your tax payments through EFTPS you will need to enroll in EFTPS to make those payments.
It is also a good idea to enroll in EFTPS separately so that you have flexibility if you ever need to change payroll companies.
Let's review what you've learned.
You learned about filing and paying federal income taxes electronically.
If you're an employer please join us for lessons six through nine to learn about filing and paying your employment taxes electronically.
I hope you'll take advantage of our IRS e-file and e-pay options.
If you don't have employees please go to lesson ten, the help section.
That's where you'll find more help for your business.
Thanks for joining me and good luck with your new business.
For resources discussed in each lesson, please visit the Lesson 10 Supplement.
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