Big Changes Ahead in Payroll Taxes
Did your business pay more than $50,000 in federal employment taxes for 1995? (That includes FICA taxes withheld from employees.) If the answer is yes, get ready for a change. Starting July 1, 1997, all businesses that paid more than $50,000 in 1995 must deposit their federal business taxes electronically.
According to Debra Heikkinen, a tax manager at Price Waterhouse, the government's new Electronic Federal Tax Payment System (EFTPS) will increase by about one million the number of businesses required to make electronic deposits. Even if you have just a few well-compensated employees, your company may well be one of them. The IRS says that it will contact you if your business falls into that category, but you shouldn't count on being notified. It's your responsibility to enroll in the program even if you're not contacted, and you could be penalized if you haven't signed up. (What's more, the annual federal tax threshold for electronic deposits will later be reduced to $20,000.)
How do you start? Call the EFTPS Customer Service Center at 800-555-4477 or 800-945-8400.
If you have an IBM-compatible personal computer with a modem, the IRS says it will send you software you can use to make the deposits yourself. Otherwise, you'll have to rely on your banker.
DONNA FENN | Inc.com Contributing Editor
Donna Fenn is the author of Upstarts! How GenY Entrepreneurs Are Rocking the World of Business and 8 Ways You Can Profit From Their Success, an exploration of the ways Gen Y is changing the entrepreneurial landscape.