Bookkeepers of the world rejoice – your days of standing in line on the 15th of each month to make your company’s payroll tax deposit are coming to an end.
The IRS has announced plans to phase out the ability to make manual payroll deposits in the next 18 months. Say goodbye to the little yellow coupon book and hello to e-filing, through the IRS’s e-file program, EFTPS.
My guess is the IRS wants this change for three reasons. First, it will help them to track down and fine late filers (“What? No, I deposited it – it must have been the bank who didn’t send it over on time!”). Second, by cutting out banks as middle-men, those payroll tax dollars will hit the IRS’s coffers sooner, rather than later.
The third reason I’m guessing is to help combat payroll fraud. Many small businesses outsource payroll to a company that specializes in it. They send checks to the payroll company covering employee salaries and all payroll expenses, and the payroll company cuts the paychecks, then calculates and sends in the appropriate payroll taxes. When it works, it’s a great thing. When it doesn’t, watch out! Typically what happens is the payroll company skims off part of the payroll tax, or just pockets the entire thing. The payroll company subsequently disappears (or gets caught), and all its small business victims get the unpleasant shock of having to pay all the missing tax to the IRS – again.
If your small business hasn’t already entrolled in EFTPS, head over to www.irs.gov to learn more about EFTPS and to get set up.