Q & A on Paying Taxes by Electronic Funds Transfer
This Informational Publication has been superseded by IP 99(16)
BACKGROUND: In 1992, the Connecticut General Assembly authorized the Department of Revenue Services (DRS) to require certain taxpayers to pay their taxes by electronic funds transfer (EFT) instead of by check or other payment method. A taxpayer whose liability for a particular tax in the prior year exceeded $500,000.00 per year was required to pay that tax by EFT. Legislation enacted during the 1996 session of the General Assembly reduced the threshold at which a taxpayer is required to pay by EFT for 1996 and again for 1997:
- Effective July 1, 1996, taxpayers whose liability for a particular tax in the prior year exceeded $300,000.00 will be required to pay that tax by EFT.
- Effective July 1, 1997, taxpayers whose liability for a particular tax in the prior year exceeded $100,000.00 will be required to pay that tax by EFT.
STATUTORY AUTHORITY: Conn. Gen. Stat. 12-686(a), as amended by 1996 Conn. Pub. Acts 221, 9 and 10.
1. What is an Electronic Funds Transfer?
Electronic Funds Transfer (EFT) is an electronic method of transferring a payment that replaces conventional check-writing. One way that an EFT is handled is through the Automated Clearing House system (ACH), a nationwide network that electronically transfers funds. Common applications for the ACH are direct deposit of payroll and social security benefits, payment of taxes, and automatic payment of life insurance premiums. The clearing facilities, delivery methods and settlement services operated by the Federal Reserve system are utilized within the ACH network in order to maintain security and to increase the efficiency of transactions.
2. How was I chosen to participate in the EFT program?
Connecticut law authorizes DRS to require certain taxpayers to pay their taxes by EFT. This law provides that DRS may require taxpayers whose prior year's tax liability for a particular tax type exceeded the statutory threshold to pay that tax by EFT. Effective July 1, 1996, the statutory threshold is $300,000.00. Effective July 1, 1997, the statutory threshold is $100,000.00. DRS has reviewed your filing record for the past year and has determined that your tax liability for a particular tax exceeded the threshold and you are required to pay that tax by EFT.
3. Will I be required to pay tax by EFT indefinitely?
No. Your tax liability will be reviewed annually. You will be notified if you are no longer required to pay by EFT, but you must continue to pay by EFT until you are so notified.
4. May I demonstrate that I am not required to pay tax by EFT?
Yes. You must prove that your tax liability for a particular tax in the prior year did not exceed the statutory threshold.
5. May I make payments using EFT even though I am not required to do so?
Yes, but you must first contact the EFT Unit for information on voluntary payment of taxes by EFT.
6. What EFT methods may I use to pay my taxes?
You may use either of two methods: the ACH Debit method or the ACH Credit method.
7. How does the ACH Debit method work?
To use the ACH Debit method, you simply place a toll-free call to DRS's Service Bureau. Through either the touch-tone menu or the Service Bureau operator, you authorize the amount of the payment and the date of transfer. You will also furnish your confidential company identification number, the tax type and the tax return filing period. Your telephone call functions as an authorization to DRS's Service Bureau to arrange an EFT that will move the tax payment from your bank to DRS's bank.
8. How does the ACH Credit method work?
With ACH Credit method, you (not DRS) initiate the EFT through your own bank. You will need to coordinate with your bank to correctly format your payment with your Connecticut tax registration number, the tax type, and tax return filing period. You must ensure that your bank can perform its part of the transaction using the ACH standard CCD + TXP format. If your bank cannot conform to this format, you must use the ACH Debit method.
9. What are the advantages of the ACH Debit method?
ACH Debit transactions can be virtually error-free when sent to the banking system because extensive editing and data correction can be performed before the EFT is initiated. At the completion of the authorization telephone call you will receive a confirmation code verifying that you have initiated your payment. After you make the authorization telephone call, DRS or DRS's Service Bureau is responsible for the successful completion of the transaction. The costs of ACH Debit transactions are borne primarily by DRS.
10. Which payment method does DRS recommend?
DRS recommends using the ACH Debit method, because with the ACH Debit method, there are likely to be fewer errors made in transmitting information. Also, with the ACH Debit method, the cost of the transaction is borne primarily by DRS. With the ACH Credit method, all costs are borne by the taxpayer.
11. If I authorize DRS to debit my account to pay my taxes as the ACH Debit method requires, will DRS be able to access my bank account for any other purpose?
No. DRS will not have access to your account. You must initiate any payments. Access codes and passwords ensure that only you can authorize the transfer of funds from your bank account to DRS's bank account and that the funds are applied to the proper tax account.
12. May I use any other EFT methods besides the ACH Debit and ACH Credit methods?
13. May I change my EFT method at any time?
You may change your payment method only with the prior approval of DRS's EFT Unit.
14. How do I register for EFT?
Complete Form EFT-1, Authorization Agreement for Electronic Funds Transfers, indicating your choice of EFT method and providing the required bank information. Upon receipt of the completed Form EFT-1, DRS will send your designated contact person additional information and instructions.
15. May my paid preparer or accountant serve as my primary EFT contact person?
The primary contact person should be the person making the EFT payment; however, regardless of who is the primary contact person, the taxpayer is ultimately responsible for the timely payment of taxes.
16. How do I report changes in the registration information that I entered on Form EFT-1?
Report a change in your EFT method or bank information by sending a completed Form EFT-1 (with the caption "AMENDED" written across the top) to:
Department of Revenue Services
EFT Unit, P.O. Box 2937
Hartford, CT 06104-2937
Report other changes in registration information (e.g., change of address or EFT contact person(s)) by contacting the EFT Unit in writing.
17. Are the due dates the same for EFT as they are for paying by check?
No. Taxpayers who are required to use EFT must have their payment of state tax in the State's bank account by the due date. For the payment of withholding tax only, the EFT payment will be considered timely if the State's bank account is credited on either the due date or the next succeeding business day.
18. Is there a penalty for a late tax payment by EFT?
Yes. A late tax payment by EFT is subject to the same penalty and interest charges as any other late tax payment. If payment is delayed for reasons beyond your control, you must submit proof that you exercised due diligence.
19. May I pay in advance by check if I am supposed to pay by EFT?
No. Payment by check will not meet your obligations to pay by EFT and will be treated as a late payment.
20. Will I get any written verification or acknowledgment from DRS if I make an ACH Debit or an ACH Credit transaction?
21. How do I prove I made a timely ACH Debit transaction?
ACH Debit transactions always generate a confirmation code from DRS's Service Bureau indicating the time and date of the authorization telephone call.
22. How do I ensure that my payment will be timely?
Taxpayers using the ACH Debit method must initiate their transaction no later than 4:30 P.M. Eastern time on the last banking day prior to the due date. Taxpayers using the ACH Credit method should consult with their financial institution.
23. When do I call my bank or DRS's Service Bureau, as the case may be, if the due date for payment falls on a weekend or legal holiday?
When a due date falls on a weekend or legal holiday, payment is due the first business day following the Saturday, Sunday, or legal holiday. For an ACH Debit transaction, you must initiate the EFT by the last banking day prior to the weekend or holiday. For an ACH Credit transaction, contact your bank for information. Legal holidays are New Year's Day, Martin Luther King Day, Lincoln's Birthday, Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and Christmas. For the current year's holiday schedule, call the EFT Unit.
24. If I have a problem contacting DRS's Service Bureau for an ACH Debit transaction, whom should I call?
Contact the EFT Unit in sufficient time to correct the problem.
25. How do I prove I made a timely ACH Credit transaction?
You must submit documentation from your bank indicating that your bank account was debited on or before the due date.
26. In both ACH Debit and Credit transactions, when are the funds actually withdrawn from my bank account?
If you initiate a transaction on time, the funds will be withdrawn from your account on the due date.
27. If I use the ACH Debit method, may I make my authorization call early and not have my bank account debited until the due date?
Yes, your payment information may be "warehoused" for up to 30 days. Your payment will not be withdrawn from your account until the date you specify as a due date.
28. May I make multiple payments by EFT?
Yes. For the ACH Debit method, follow the Service Bureau's instructions. If you use the ACH Credit method, you initiate multiple payments by EFT through your originating bank.
29. What can I do if an emergency prevents me from making a timely EFT using the ACH Debit or ACH Credit method?
Contact the EFT Unit immediately for instructions. You may be permitted to make your payment using the Fedwire method. If it is not established to DRS's satisfaction that an emergency exists, your payment by Fedwire will be treated as a late payment.
30. Is it possible to cancel or correct an EFT?
ACH Debit transactions can be changed or corrected before the cut-off time on the same day that the call was made by following the instructions of DRS's Service Bureau. For an ACH Credit transaction, follow the bank's instructions. Contact DRS's EFT Unit if an error in payment is discovered too late to change the EFT.
31. How do I report no tax due?
If you do not owe any tax, an EFT is not required; however, a return must be timely filed even if no payment is due.
32. How will I be notified of underpayments?
You will receive a billing through DRS's normal billing cycle. All billings will provide names and telephone numbers of persons to be contacted if you have billing questions.
33. May I pay billings by EFT?
You may pay billings by EFT or by check; however, for proper application of payment, a separate EFT must be made for each tax period.
34. How will I be notified of overpayments?
You will be notified of any overpayment of tax either by telephone or in writing.
35. May I apply an EFT overpayment on my next return?
Yes. If you are notified of an overpayment, you may request that the overpayment be applied to your next EFT return, or you may request a refund.
FILING TAX RETURNS:
36. Do I file tax returns at the same time that I pay my taxes by EFT?
Tax returns must be filed on or before the due date and, if mailed, must bear a United States Postal Service cancellation mark that is dated on or before the due date.
37. Are there penalties for late filing of the tax return?
Yes. There is a penalty for the late filing of a tax return, even if the corresponding payment of tax by EFT is timely made.
38. Are there exceptions to the requirement to file tax returns?
Yes. Employers paying withholding tax by EFT need not file withholding coupons (Forms CT-WH); however, they must still file quarterly and annual withholding tax reconciliations (Forms CT-941 and CT-W3, respectively). If additional payment is due with Form CT-941, this payment must be sent by check.
For taxpayers paying estimated Corporation Business Tax, Foreign or Domestic Insurance Premium Tax or Health Care Center Tax, beginning in income year 1996, DRS no longer requires taxpayers to file estimated tax coupons when they make their estimated tax payments by EFT. Payments accompanying a request for an extension of time to file and, subsequently, a completed return should be made by check and accompany the return.
39. If, after my tax return has been filed, I discover that I have over reported or underreported a particular tax that I pay by EFT, what should I do?
Your tax return must be amended in the same manner as if you did not pay that tax by EFT. Follow the procedure for the particular tax. Any additional tax due is payable by check with the amended return.
RELATED FORMS AND PUBLICATIONS:
SN 96(5), 1996 Legislative Changes Affecting Payment of Connecticut Taxes by Electronic Funds Transfer
EFFECT ON OTHER DOCUMENTS: IP 93(2) issued 2/23/93 is superseded and may no longer be relied upon on or after the date of issuance of this Informational Publication.
FOR FURTHER INFORMATION: To contact the EFT Unit, call 860-297-4973 or fax the unit at 860-297-4797.
PLEASE NOTE THE FOLLOWING NEW INFORMATION ABOUT DRS.
FOR FURTHER INFORMATION: To order forms and publications or for further information, call the Department of Revenue Services at 860-297-5962 (Hartford area or out-of-state) or 1-800-382-9463 (in-state). Forms and publications may be ordered through voice-mail 24-hours a day by choosing Option 3 on your touch tone telephone.
Electronic Delivery Options: You can also obtain tax forms and publications 24-hours a day from our Web home page at http://www.ct.gov/drs. Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.
Electronic Funds Transfer
Replaces: IP 93(2) issued 2/23/93