FOR IMMEDIATE RELEASE, Contact: (202) 225-7601
April 9, 1997
No. OV-4
Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on Oversight of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing to examine the Electronic Federal Tax Payment System. The hearing will take place on April 16, 1997, in room B-318 Rayburn House Office Building, beginning at 9:30 a.m.
In view of the limited time available to hear witnesses, oral testimony will be from invited witnesses only. Witnesses will include officials from the Department of the Treasury and the Internal Revenue Service (IRS), small businesses, payroll service providers, the banking industry, and others. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.
BACKGROUND:
Businesses must withhold or pay a variety of Federal taxes, e.g., Federal Insurance Contribution Act (FICA), income, excise, and corporate estimated taxes. Historically, businesses have been required to deposit these taxes in a government depository (i.e., banks and savings institutions designated by the Treasury Department as Treasury tax and loan depositories), with each deposit accompanied by a Federal tax deposit coupon supplying the taxpayer's name, identification number, tax period, and the type of tax being paid. The bank then processes the payment and coupon information and forwards it to the Federal Government.
Legislation enacted in 1993 (section 6302(h) of the Internal Revenue Code) required the IRS to implement a nationwide system for receiving Federal depository taxes electronically. This system, the Electronic Federal Tax Payment System (EFTPS), is intended to replace the existing paper coupon system to provide a simple, paperless way for taxpayers to make Federal tax deposits.
Under section 6302(h), IRS was required to phase in EFTPS from
1994-1999 and to collect a statutorily specified percentage of
business taxes through electronic payment in each year. The IRS
issued regulations in July 1994 which, among other things, set forth
a schedule for implementing the program. Under the regulations,
businesses would be required to begin using EFTPS if their annual
employment tax deposits exceed certain thresholds. Under the
phase-in schedule, if a taxpayer:
|
Desposited more than: |
In calendar year: |
The taxpayer must begin using EFTPS as of: |
| $47 million | 1993/1994 | 1/1/96 |
| $50 thousand | 1995 | 1/1/97 |
| $50 thousand | 1996 | 1/1/98 |
| $20 thousand | 1997 | 1/1/99 |
A March 21, 1996, temporary regulation expanded the EFTPS requirement to cover businesses which do not make employment tax deposits, but whose other Federal tax payments exceed certain thresholds. If their other Federal tax deposits were:
|
More than: |
In calendar year: |
The taxpayer must begin using EFTPS as of: |
| $50 thousand | 1995/1996 | 1/1/98 |
| $20 thousand | 1997 | 1/1/99 |
Between June 23 and July 1, 1996, IRS sent letters to approximately 1.2 million taxpayers to inform them of the requirement to enroll in EFTPS and begin paying their Federal depository taxes electronically by January 1, 1997. Among other things, the letters indicated that taxpayers who failed to enroll in EFTPS and began making their Federal tax deposits electronically as of January 1, 1997, would be assessed a penalty equal to 10 percent of the amount required to be deposited.
For many small businesses, particularly those that do not use payroll service providers to handle their payroll accounts, receipt of the IRS package was the first time they had heard of EFTPS. In response, many small business owners expressed concerns to Congress about being mandated to pay their taxes electronically and about the possibility that they would be subjected to significant penalties for failure to comply with the mandate. At the same time, concerns were also being raised that there was insufficient time remaining in the year to fully inform the affected businesses about the mandate to enroll in EFTPS, to actually enroll all mandated taxpayers on a timely basis, and to test the system before it became operational on January 1, 1997.
To address these concerns, Congress included a provision in the Small Business Jobs Protection Act (P.L. 104-188) to delay until July 1, 1997, the requirement for affected taxpayers to begin paying their depository taxes electronically through EFTPS.
In announcing the hearing, Chairman Johnson stated: "Not only do we need to evaluate whether the Electronic Federal Tax Payment System is actually ready to serve the 1.2 million taxpayers who are mandated to enroll and begin paying their taxes electronically by July 1, 1997, but the Subcommittee also needs to consider the full range of costs and benefits associated with this system for small business taxpayers."
FOCUS OF THE HEARING:
Effective July 1, 1997, approximately 1.2 million taxpayers will be required to begin making their Federal tax deposits electronically through EFTPS. The Subcommittee will examine: (1) the current status of IRS's efforts to implement EFTPS; (2) concerns which have been identified by small businesses, payroll service providers, the banking industry, and others about specific features of EFTPS (e.g., whether taxpayers will have the ability to quickly correct erroneous payments, whether the procedures that have been established to deal with emergencies which prevent taxpayers from making timely payments, such as natural disasters, are adequate); and (3) whether an additional delay in the July 1, 1997, effective date or other changes to the program are necessary.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written statement for the printed record of the hearing should submit at least six (6) copies of their statement and a 3.5-inch diskette in WordPerfect or ASCII format, with their address and date of hearing noted, by the close of business, Wednesday, April 30, 1997, to A.L. Singleton, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. If those filing written statements wish to have their statements distributed to the press and interested public at the hearing, they may deliver 200 additional copies for this purpose to the Subcommittee on Oversight office, room 1136 Longworth House Office Building, at least one hour before the hearing begins.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a witness, any written statement or exhibit submitted for the printed record or any written comments in response to a request for written comments must conform to the guidelines listed below. Any statement or exhibit not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.
1. All statements and any accompanying exhibits for printing must be typed in single space on legal-size paper and may not exceed a total of 10 pages including attachments. At the same time written statements are submitted to the Committee, witnesses are now requested to submit their statements on a 3.5-inch diskette in WordPerfect or ASCII format.
2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a statement for the record of a public hearing, or submitting written comments in response to a published request for comments by the Committee, must include on his statement or submission a list of all clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the name, full address, a telephone number where the witness or the designated representative may be reached and a topical outline or summary of the comments and recommendations in the full statement. This supplemental sheet will not be included in the printed record.
The above restrictions and limitations apply only to material being submitted for printing. Statements and exhibits or supplementary material submitted solely for distribution to the Members, the press and the public during the course of a public hearing may be submitted in other forms.
The Committee seeks to make its facilities accessible to persons with disabilities. If you are in need of special accommodations, please call 202-225-1721 or 202-225-1904 TTD/TTY in advance of the event (four business days notice is requested). Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above.