Whether you are required to use EFTPS is dependent upon how
much your total tax deposits (including both the payroll tax
deposits and income tax deposits) are. the threshold amount,
which I am afraid I don't have at my fingertips, is shown on
the instructions for filing form 1120.

I also called IRS EFTPS people on this one, and the person I
spoke with indicated that she believed that, even though IRS
was sending out letters indicating they MAY impose penalty
(when the 1120 is actually filed) for 1120 deposits not made
using EFTPS, they had not actually programed their computers
to do so as of December, 2003.

I've had my client start looking into making their 4/15/04
estimated tax payment using EFTPS, and am hoping that, if
penalty is mentioned when we file their return, we can get
it abated based on the fact that the January payment was the
first estimated tax payment the corporation has ever made,
and that the corporation immediately changed to EFTPS upon
notification from Internal Revenue Service.

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"BM30003700" <bm30003700[at]aol.com> wrote:

- quote -

I don't have an answer, but your post now tells me I have a
question along these lines.

We paper file our mutual benefit non profit corporations
taxes, and have been using a coupon to make estimated tax
payments. We have a payroll service do our payroll and file
payroll tax forms and payments. Can we continue to pay our
tax payments and estimates by paper? When is EFTPS (sounds
like some sort of electronic filing) required?

thanks.

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My client received a letter from IRS stating that, because
they used a tax coupon to make an 1120 estimated tax payment
for tax year 2003 at their bank in January 2004, rather than
EFTPS, they may be subject to 10% penalty when their tax
return is filed.

Is the 10% based on tax liability or the amount deposited?
In other words, if the deposit was for $20,000 but the Form
1120 only showed $10,000 would the penalty be 10% of $20,000
or $10,000?

I can't find anything with 1120 instructions which states
expressly whether the 10% is based on tax deposit amount or
actual tax liability on the 1120. Intuitively, it would seem
to me that, because the IRS waits until the return is filed,
it must be based on tax liability.

Also, my client used the coupon system because I ordered the
coupons and sent one to the client. It appears that my
client was required to use EFTPS in year 2003 due to their
employment tax payments (which Intuit handles, via my
clients use of Quickbooks).

Should we request abatement now, blaming the mistake on
advice from their accountant, or wait until penalty notice
is received from IRS. I am hoping that my client will get
penalty abatement, as this is the first estimated income tax
payment they have ever made, and they've never had income
tax due prior to year 2003.

Thanks for any and all thoughts on this

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