Taxpayers who owe additional tax when they file an employment tax return, must pay the balance due by the original due date of the return or be subject to interest and penalties. An extension of time to file a return is not an extension of time to pay a balance due. Taxpayers have three choices when paying taxes: Electronic Funds Withdrawal (EFW), Electronic Federal Tax Payment System (EFTPS) or Check or Money Order.
Electronic Funds Withdrawal (EFW): Balance due payments can be submitted via the EFW (direct debit) payment option at the time a return is filed. EFW payments require the following information: Routing Transit Number, Bank Account Number, Account Type, Payment Amount, Requested Payment Date, Taxpayer’s Daytime Phone Number and a signed consent statement. The EFW payment option is not available for making federal tax deposits.
If a return is rejected, it can be corrected within 10 calendar days and be given the received date of the original rejected return. This 10-day transmission perfection period does not apply to payments. When a return is rejected on the due date, it is recommended that the EFW payment not be transmitted with the return and that another payment option be used.
If the taxpayer chooses to pay using the EFW method, they may authorize the entire balance due up to $2500.00 for Form 941/944 or $500 for form 940.
The requested payment date of an EFW must not be more than 5 days prior to the submission date. If the submission date is on or before the due date, the requested payment date must be on the due date or before the due date of the return. If the submission date is after the due date, the requested payment date must not be later than the date the return is submitted.
To cancel an EFW the taxpayer must contact the IRS E-file Payment Inquiry and Cancellation Service at 1-888-353-4537. Taxpayers should wait at least ten (10) calendar days from when the IRS e-file return was accepted before calling. The caller should be prepared to provide the Employer Identification Number (EIN), state that the payment is a business payment, provide the exact payment amount (dollars and cents) and bank account number. Cancellations must be made by 11:59 p.m. Eastern Standard Time two business days prior to the scheduled payment date.
Electronic Federal Tax Payment System (EFTPS): To use EFTPS, taxpayers must first enroll. Enrollment may take up to 45 days to complete. Any tax can be paid using EFTPS which is available year-round, 24/7. Payments can be made online using the EFTPS.gov website, or by phone using the EFTPS Voice Response System.
Check / Money Order: Payments by check or money order do not have to be mailed at the same time the electronic return is transmitted. A payment (with a voucher, if applicable) can be mailed at any time on or before the return due date. Payments should be made payable to “United States Treasury” and must include the EIN, type of tax return and year and quarter to which the payment applies. Taxpayers should adhere to the requirements for electronic deposits. A foreign corporation that does not bank in the United States cannot pay using EFW or EFTPS.
If you don't type your business name or EIN correctly when you e-file an employment tax return, your return will be rejected.
Name Control matching is a process in IRS Modern Electronic Filing (MeF) that verifies the Employer Identification Number (EIN) and Name Control of the filer against the IRS’s National Account Profile (NAP) database. The NAP application is designed as an Internal Revenue Service (IRS) Master File research tool. Each data item in the NAP system is required to identify a specific taxpayer so that a filed tax return can be processed correctly.
Name Control mismatch is one of the most common causes for the rejection of returns in MeF so it is critical to ensure that each return submitted has the correct Name Control.
When a business appplies for en EIN, the IRS issues Notice CP 575 which contains the Name Control assigned to the business.
Generally, the Business Name Control is derived from the first four characters of the business name and consists of up to four alpha and/or numeric characters. The Name Control can be fewer than four characters, but not more. Blanks may be present only at the end of the Name Control. The ampersand (&) and hyphen (-) are the only special characters allowed in the Name Control. When an invalid character is used in the name line, the name control will drop the special character from the taxpayer's name (for example, “4U.com” will be interpreted as “4UCO”). Software Developers incorporate the IRS’s Name Control parameters into their software.
An electronic signature is a legal way to get approval on electronic documents or forms. It replaces a handwritten signature and increases the efficiency of virtually any process. As with any tax return submitted to the IRS on paper, an electronic tax return must be signed by an authorized signer, an ERO and a paid preparer, if applicable. The IRS MeF system requires taxpayers and providers to use specific signature methods for signing electronic returns such as the Practitioner Personal Identification Number (PIN) method, Scanned Form 8453 Signature method, Reporting Agent PIN method and the Online Signature PIN method. Each of these methods requires specific forms to be attached to the return and must follow certain steps required to sign the return electronically.
Form 8879-EMP Practitioner PIN Signature method: Can only be used if the taxpayer uses an ERO. Taxpayer chooses a five-digit, self-selected PIN as their signature. Taxpayer can authorize the ERO to input this number in the software or must input physically directly into the software. The PIN number cannot be all zeros. Form 8879-EMP must be completed by the ERO and must be retained by both the ERO and the taxpayer for 3 years from the return due date. If a paid preparer is involved, the ERO is responsible to include the required information in the return. The paid preparer should also keep a copy of the return approved and signed by the taxpayer. Form 8879-EMP should not be mailed to the IRS unless the IRS requests a copy.
Scanned Form 8453 Signature method: It involves signing a peper Form 8453-EMP and attaching it electronically to the e-filed return as a PDF document. This document is a jurat, it has the same legal effect as if the taxpayer had actually and physically signed the return. This form can authorize an ERO, a Transmitter or an ISP to send the return to the IRS. The form must be retained by the taxpayer and should not be mailed to the IRS.
Form 8655 Reporting Agent PIN Signature method: A reporting agent is an accounting service, franshiser, bank or other entity authorized to prepare, sign and electronically file employment forms for taxpayers. Reporting agents sign all electronic returns they file with a 5-digit PIN signature. The reporting agent PIN is issued through the IRS e-file application process. Reporting agents can transmit returns directly or use a third-party Tranmitter. Reporting agents must submit Form 8655 to the IRS prior to updating or submitting an IRS e-file application. Form 8655 gives the tax professonal authority to sign the client's return with their reporting agent's 5-digit PIN.
Online Signature PIN method: This method is available for an authorized individual to act for an entity in legal and/or tax matters and is held liable for filing all 94x returns and making all 94x tax deposits and payments. It authorizes an entity to file no more than 5 returns per year. This method does not give authorization to file bulk returns or returns for other businesses. To become an Online e-Filer, the applicant must first complete the 94x PIN Registration Process using commercial software. Registration can take up to 45 days to process. The PIN assigned to the participant consists of a 10-digit number which is used to electronically sign an employment tax return.
When you discover an error on a previously filed Form 941, you must correct that error using Form 941-X. If you didn’t file a Form 941 for one or more quarters, don’t use Form 941-X. Instead, file Form 941 for each of those quarters. If you didn’t file Forms 941 because you misclassified workers as independent contractors and are now reclassifying them as employees, you will need to file both Forms 941 and 941-X together. Do not file Form 941-X to correct the number of employees or the liability amounts reported on Form 941 or Schedule B. To correct federal tax liabilities see the instructions for Schedule B.
Generally, Form 941-X must be filed within 3 years starting April 15 of the following year of the year of the return. For example, if you are amending any quarter of a 2019 form 941, you can file Form 941-X by April 15, 2023. In this example, the IRS starts the clock on April 15, 2020. This is called "period of limitations".
Also, if you are correcting overreported amounts and are filing form 941-X in the last 90 days of a period of limitations, you MUST use the claim process. You can’t use the adjustment process. If you’re also correcting underreported amounts, you must file another Form 941-X to correct the underreported amounts using the adjustment process and pay any tax due.
Filing form 941-X is not easy. Therefore, it is recommended you read the instructions carefully before completing your adjustments. Key items to be familiar are whether you underreported or overreported wages and whether you want to claim a refund or want to apply a credit to the tax period in which you are filing the adjustment. As a result of this, you may need to include any overpayment resulting from filing form 941-X as a credit on a future form 941.
Form 941-X cannot be electronically filed. This form must be paper filed.
A provider is an entity authorized by the IRS to participate in IRS e-file. To become a provider, the entity must submit an application, meet eligibility criteria and pass a suitability check before the IRS assigns an Electronic Filing Identification Number (EFIN). An entity identifies its e-file activity by selecting the appropriate provider option in the IRS e-file application. Each provider option entails a different role and may have different responsibilities that relate specifically to the e-file activity of the firm. The IRS may take up to 45 days to approve an e-file application.
A provider can be classified as an Electronic Return Originator (ERO), Intermediate Service Provider, Transmitter, Software Developer, Reporting Agent, Online Provider or a Large Taxpayer. These roles are not mutually exclusive. Therefore, providers can operate under multiple roles. For a full list of IRS e-File providers click here.
An Electronic Return Originators (ERO) originates the electronic submission of a return to the IRS. The ERO is usually the first point of contact for most taxpayers e-filing a return. There are about 180,000 entities classified as ERO's in the United States. Most entities apply to be ERO's because this category allows them to receive taxpayer information and pass it on to a transmitter. An ERO can be the accounting firm or the H&R Block office in your neighborhood.
A Software Developer develops software that formats electronic return information according to IRS e-file specifications. There are about 700 approved software developers in the United States.
A Transmitter sends the electronic tax data directly to the IRS. The IRS accepts transmissions using a variety of telecommunication protocols. There are approximately 41,000 approved transmitters in the U.S.
Interesting facts: there are only about 530 entities that are classified as ERO's, Transmitters and Software Developers and only a handful of entities, 26 at the time this article was written, that are listed in the IRS website as Tax Year 2020 94x Modernized e-File (MeF) Providers. See IRS list here.