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What is the Electronic Federal Tax Payment System (EFTPS)?

Posted on April 25, 2019April 17, 2019 by Toni Cameron

The Electronic Federal Tax Payment System (EFTPS) is a free service provided by the U.S. Department of the Treasury. The EFTPS allows you to view and make all federal tax deposits or payments.

While you can use the EFTPS to make personal federal estimated tax payments, www.irs.gov/directpay is easier and doesn’t require you to have an account. In most cases, questions about the EFTPS come up when discussing payroll.

Your payroll taxes will need to be made via EFTPS. That means you either have an existing EFTPS account or you will need to set one up. If you are working with a payroll software like Gusto, then you’ve likely had one setup for you and should have received a confirmation letter in the mail.

If you have to process back payroll, you will need to set up a EFTPS account ASAP so you can make your payroll tax payments.

You are still responsible for making sure that your payroll tax payments are being made by your payroll provider.

How to Set Up an EFTPS Account

STEP 1:

Enroll online at https://www.eftps.gov

To get started, you will need the following:

Taxpayer Identification Number (your Employer Identification Number if you’re enrolling as a business or your Social Security Number if you’re enrolling as an individual).
Banking account number and routing number.
Address and name as they appear on your IRS tax documents.

Then, simply follow these instructions:

Select “Enrollment.”
Select “Business,” or “Individual,” or “Federal Agency.”
Enter the requested information.
Submit.

In seven business days, you will receive your PIN in the mail.

STEP 2:

Get your password.

Go to EFTPS.gov and click on “Log In.”
Click on “Need a Password.”
Enter your EIN or SSN and your PIN.
Verify your banking information or your EFTPS enrollment number (which appears on your PIN letter or was given to you when you activated your enrollment via phone) and select “Next.”
Create your new Internet password.

STEP 3:

Make your payment.

Go to www.eftps.gov and select “Make a Payment.”
Select “Log In” again and use your EIN, PIN, and the password you just set.
Enter the payment information in the step-by-step screens.
When you’re finished, save a copy of the Payment Confirmation page. This contains your EFT Acknowledgment Number that acts as a receipt for your payment instruction.

TL;DR: Managing your EFTPS account is your responsibility. If you need help with back payroll, contact us.

Lessons Learned This Tax Season

Posted on April 18, 2019April 17, 2019 by Toni Cameron

This season started off to a rocky start with the government shutdown and reduced staff at the IRS. A new set of tax laws and a lack of approval from the IRS on all the forms we needed to file made this year start very, very slowly. This meant we began filing returns a week later than we did in 2018.

Due to the new tax laws, we determined that each of our clients would require more time than usual.. I estimated each client would require around 45 minutes more per return, but the actual number was closer to 1.5 hours. As you can guess, this added time started to create a backlog in early March. Though we hired additional staff to keep all of the returns and communication flowing, it wasn’t enough to cover all of our bases.

For the first time since I started this firm, we had to enforce the drop date of March 15th, which is explained in our engagement letters. Anyone who did not provide us their information before this date would be subject to a tax extension.

Despite its challenges, we survived tax season, we filed all of the extensions needed, and we filed many tax returns. The question then becomes, what have we learned from this?

For me, the first lesson learned is: while I have a plan and a backup plan, that doesn’t mean it is guaranteed to be enough. When planning for tax season, I need to accommodate for factors like the flu, which hit two of our staff during our busiest time of the year.

Second, I need to look at how many additional clients we are willing to bring on during tax season. We have always had some strong rules about the number of clients we would bring on and the type of returns we would process. I enforced several of these rules and walked away from some potential clients that were not a good fit. For other clients, I really wanted to help and bent the rules when I should not have.

Third, we need to set better expectations surrounding communication with our clients. We tend to send out email updates to our email list along of clients along with social media but not everyone is signed up to receive these updates.

Our goal is to always improve and do our best.

Thank you for standing with us through this tax season.

Best,

Toni

What the Heck Do I Do About Estimated Taxes?

Posted on April 11, 2019March 27, 2019 by Toni Cameron

What the Heck Do I Do About Estimated Taxes?

Quarterly taxes, business taxes, estimated tax payments — are these all the same thing?

Federal estimated tax payments are quarterly payments paid on your business or self-employed income. In Washington State, we also have State Business and Occupancy taxes.

Do I need to make estimated tax payments?

If you fall into both of the following categories you had better pay in estimated taxes:

You are expecting to owe at least $1,000 or
Your withholding will be less than: the smaller of 90% of your 2019 taxes or 100% of your 2018 taxes.

How do I calculate what I should pay in?

The safe harbor of paying estimated taxes means you won’t get hit with any interest or penalties. The safe harbor number equates to either:100% of your prior year taxes or 90% of your taxes owed for 2019.

So if you total tax bill in 2018 was $5,000, you need to pay in $5,000 over the quarterly payment dates. This is the easiest way, but if you are making more money in 2019, you’ll still owe additional money when you file your taxes.

The due dates for your estimated tax payments are below:

April 15, 2019
June 15, 2019
Sep. 15th 2019
Jan. 15, 2020

You can pay online: www.irs.gov/directpay

That wasn’t too hard, was it?

Uh, wait. What if it is my first year in business?

Well, then we have to do a bit of math or use a friendly app. Each quarter you will need to pull your net profit from your accounting software (if you don’t have accounting software, please talk to an accountant), and you will need to calculate your tax on that net profit.

You can either do the math yourself, get us to do it, or use one of the various apps out there that will do it for you, such as:

Tax Calculator by TaxSlayer – Apple App Store, Google play or Web App
Total Tax Insights by AICPA – Web App

I suggest using one of the apps if you don’t want to learn the details behind estimated tax payments. If you do want to learn the details, check out 2019 Form 1040-ES.

As always, please consult your tax advisor.

TL;DR: Make sure you pay your quarterly estimated taxes, if you need help, contact us.