Soon, paper documents, such as IRS federal tax deposit payment coupons, will be a thing of the past and, as they develop electronic alternatives, both the Service and the Social Security Administration (SSA) are looking to the employer community. Lillie McCracken, the project manager for the IRS Cash Management System, told employers at an April 10 seminar sponsored by the American Payroll Association that the Service plans to have the paper coupon system eliminated after 1999.
The phase-out of paper is the compliment to the five-year phase-in of a system to electronically collect federal depository taxes. Norman Goldstein, senior financial executive for the SSA, briefed employers on how the move to electronic filing will change the SSA’s guidance for filing wage reporting information.
The shift from paper filing of tax deposits to electronic filing was mandated under the North American Free Trade Agreement Implementation Act (PubLNo 103-182) and began at the start of 1995, with employers whose annual employment tax deposits exceeded $78 million. It will become fully phased in by January 1999 when taxpayers who pay $20,000 in deposits each year will be required to file electronically.
McCracken briefed filers on how the Service plans to conduct the transition from the current electronic deposit payment system, TaxLink, a prototype system that was adopted to implement the electronic payment mandate when NAFTA was enacted. The Service’s electronic payment initiative will move from TaxLink to a new Electronic Federal Tax Payment System (EFTPS), which is scheduled to become fully operational later this year.
According to McCracken, the Service will begin to notify depositors how to switch to or enroll in the EFTPS during May and June. The system is currently under review by an independent auditor, she said. Once it has been validated and certified, the Service will be seeking volunteers to go online in the new system.
The SSA is also gearing up for more electronic communication with filers. In August, when SSA hosts its payroll reporting conference, officials plan to roll out a draft version of the SSA’s revision of its technical information bulletin for submitting wage and tax reports on magnetic media, commonly known as TIB 4. According to Goldstein, the draft will include changes that the SSA plans to implement to make room for an electronic, rather than paper-based, reporting environment. Included in those revisions will be the elimination of unused fields and support for using 8-inch diskettes. The proposed TIB 4 will also consolidate TIBs 5, 6 and 7, which provide guidance to employers in Puerto Rico, the U.S. Virgin Islands and Guam, respectively, for submitting wage and tax data to the federal government.
The infrastructure is being put into place to eliminate forms like Form W 3, Transmittal of Income and Tax Statements, and Form 6559, Transmitter Report of Magnetic Media Filing, Goldstein indicated. He predicted that, in the coming tax year, the SSA will initiate a personal identification number system to serve as an alternative to more traditional paper-based signatures.
This article originally appeared in Church Treasurer Alert, August 1996.