Connecticut State Department of Revenue Services

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IP 99(16)

Paying Connecticut Taxes by Electronic Funds Transfer

This publication has been superseded by IP 2002(17)

PURPOSE: This Informational Publication explains the requirement for paying taxes electronically.

STATUTORY AUTHORITY: Conn. Gen. Stat. §§12-685 to 12-689, inclusive.

1. WHAT IS AN ELECTRONIC FUNDS TRANSFER?

Electronic Funds Transfer (EFT) is an electronic method of transferring a payment that replaces check- writing. One way that an EFT is handled is through the Automated Clearing House System (ACH), a nationwide network that electronically transfers funds. Direct deposit of payroll and social security benefits, payment of taxes, and automatic payment of life insurance premiums are common applications of ACH. The clearing facilities, delivery methods and settlement services operated by the Federal Reserve System are used within the ACH network to maintain security and increase the efficiency of transactions.

2. WHO MUST PAY BY EFT?

Taxpayers whose prior year liability for a particular tax exceeded $100,000 and who are notified by the Department of Revenue Services (DRS) to pay a tax by EFT are required to pay that particular tax by EFT.

3. WILL I ALWAYS BE REQUIRED TO PAY THAT TAX BY EFT?

No. DRS will review your tax liability on an annual basis. You will be notified by DRS if you are no longer required to pay by EFT, but you must continue to pay by EFT until you are notified by DRS that you no longer are required to do so.

4. MAY I PROVE THAT I AM NOT REQUIRED TO PAY THE TAX BY EFT?

Yes, but you must show the EFT Unit that your tax liability for a particular tax in the prior year was not greater than $100,000.

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 to register for voluntary payment of taxes by EFT.

6. WHAT EFT METHODS MAY I USE TO PAY MY TAXES?

You may use one of two methods to pay your taxes by EFT:

  • The ACH Debit Method, or
  • The ACH Credit Method.

7. HOW DOES THE ACH DEBIT METHOD WORK?

Simply place a toll-free call to DRS’s Service Bureau. You can either use the touch-tone menu or speak to the Service Bureau operator to authorize the amount of the payment and the date of transfer. You must provide your confidential company identification number, the tax type and the tax return filing period. Your telephone call serves as your 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 the ACH Credit Method, you (not DRS) initiate the EFT through your own bank. In coordination with your bank, you will format your payment, your Connecticut tax registration number, the tax type, and the tax return filing period. You must ensure that your bank can perform its part of the transaction using the ACH standard CCD+ TXP format; otherwise, you must use the ACH Debit Method.

9. WHAT ARE THE ADVANTAGES OF THE ACH DEBIT METHOD?

ACH Debit transactions can be 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. ACH Debit transaction fees are paid primarily by DRS.

10. WHICH PAYMENT METHOD DOES DRS RECOMMEND?

DRS recommends using the ACH Debit Method because fewer errors are made in transmitting information and the fees are paid primarily by DRS. With the ACH Credit Method, all fees are paid by the taxpayer.

11. IF I AUTHORIZE DRS TO DEBIT MY ACCOUNT TO PAY MY TAXES, WILL DRS BE ABLE TO ACCESS MY BANK ACCOUNT FOR ANY OTHER PURPOSE?

No. DRS will not have access to your account for any other purpose. You must initiate any other 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?

No.

13. MAY I CHANGE MY EFT METHOD AT ANY TIME?

Yes, but only with prior approval from the 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. After receiving your completed Form EFT-1, DRS will send additional information and instructions to your designated contact person.

15. MAY MY PAID PREPARER OR ACCOUNTANT SERVE AS MY PRIMARY EFT CONTACT PERSON?

Your primary contact person should be the person that makes the EFT payments. In designating a contact person, remember that you are responsible for the timely payment of your taxes even if you designate someone else as your contact person.

16. HOW DO I REPORT CHANGES IN THE REGISTRATION INFORMATION THAT I ENTERED ON FORM EFT-1?

You must contact the EFT Unit at 860-297-4973 to report a change in your EFT method, bank information or other changes in your registration information.

17. ARE THE DUE DATES FOR PAYING BY EFT OR BY CHECK THE SAME?

No. If you pay your taxes by EFT, DRS’s bank account must be credited by EFT for the amount of your payment on or before the due date. (For withholding tax payments only, DRS’s bank account must be credited by EFT for the amount of your payment on or before the next business day following the due date.) Taxes that you pay by check must be received or deemed received by DRS by the due date. (Checks mailed to DRS are deemed received on the date shown by the U.S. Post Office cancellation mark.)

18. IS THERE A PENALTY FOR A LATE TAX PAYMENT BY EFT?

Yes. Effective for taxes first due and payable on or after October 1, 1998, penalties for late EFT payments have been reduced to:

  • 2% of the tax due for EFT payments that are not more than 5 days late;
  • 5% for EFT payments that are more than 5 days but not more than 15 days late; and
  • 10% for EFT payments that are more than 15 days late.

Interest is charged at the rate of 1% per month or fraction of a month from the due date until the date of payment.

If payment is delayed for reasons beyond your control and you are able to prove to the Department’s satisfaction that you exercised due diligence, the penalty may be waived.

19. MAY I PAY IN ADVANCE BY CHECK IF I AM REQUIRED TO PAY BY EFT?

No. Payment by check will not meet your obligation to pay by EFT and will be subject to a 10% penalty, even if DRS’s bank account is credited for the payment on or before the due date.

20. WILL I GET ANY WRITTEN VERIFICATION OR ACKNOWLEDGMENT FROM DRS IF I MAKE AN ACH DEBIT OR AN ACH CREDIT TRANSACTION?

No.

21. HOW DO I PROVE I MADE A TIMELY ACH DEBIT TRANSACTION?

Your bank account will show a debit on or before the due date. ACH Debit transactions always generate a confirmation code from DRS’s Service Bureau giving the time and date of the authorization telephone call.

22. HOW DO I ENSURE THAT MY PAYMENT WILL BE TIMELY-PAID?

If you use the ACH Debit Method, you must initiate your transaction no later than 4:30 p.m. Eastern Time on the last banking day prior to the due date. If you use the ACH Credit Method, you should consult your financial institution for information.

23. WHEN IS THE PAYMENT DUE IF THE DUE DATE FALLS ON A WEEKEND OR LEGAL HOLIDAY?

If the due date falls on a Saturday, Sunday or legal holiday, the next business day is the due date. For an ACH Debit transaction, you must initiate the EFT no later than 4:30 p.m. Eastern Time on 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 showing that your payment was initiated in time for settlement into our bank account on or before the due date.

26. WHEN ARE THE FUNDS ACTUALLY WITHDRAWN FROM MY BANK ACCOUNT?

For ACH Debit transactions, you determine the date of withdrawal by the "due date" that you enter when initiating your transfer. For ACH Credit transactions, you must contact your financial institution for withdrawal dates.

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 DRS’s 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 PAYMENT USING ACH?

Contact the EFT Unit immediately for instructions. You may be permitted to make your payment using the Fedwire method. If DRS is not satisfied 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?

Yes. You can cancel or correct an ACH Debit transaction before the cut-off time on the day that you made the call by following the instructions from DRS’s Service Bureau. For an ACH Credit transaction, follow the bank’s instructions. Contact DRS’s EFT Unit if a payment error 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.

31. HOW WILL I BE NOTIFIED OF UNDERPAYMENTS?

DRS will send you a bill through the normal billing cycle. All bills will provide the name and telephone number of the person to contact if you have questions.

33. MAY I PAY BILLS BY EFT?

Yes. You may pay bills by EFT, however, to ensure 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 by telephone or in writing.

35. MAY I APPLY AN EFT OVERPAYMENT TO MY NEXT RETURN?

Yes. If you are notified of an overpayment, you may request to have the overpayment applied to your next EFT return or you may request a refund.

36. WHEN IS MY TAX RETURN DUE?

Your tax return is due on or before the due date. Your return will be timely-filed if received or if the date shown by the U.S. Post Office cancellation mark is on or before the due date. If the due date falls on a Saturday, Sunday or legal holiday, the next business day is the due date.

37. IS THERE A PENALTY IMPOSED FOR THE LATE FILING OF A TAX RETURN IF PAYMENT OF THE TAX IS TIMELY MADE?

The Commissioner of Revenue Services may impose a $50 penalty for the late filing of any return or report that is required by law to be filed.

38. ARE THERE EXCEPTIONS TO THE REQUIREMENT TO FILE TAX RETURNS?

Yes. If you are an employer paying withholding tax by EFT, you are not required to file withholding coupons (Forms CT-WH), however, you must still file quarterly and annual withholding tax reconciliations (Forms CT-941 and CT-W3). If an additional payment is due with Form CT-941, the payment must be made by check.

Taxpayers are not required to file estimated tax coupons for Corporation Business Tax, Foreign or Domestic Insurance Premium Tax or Health Care Center Tax, when making estimated tax payments by EFT. With respect to a tax for which estimated tax payments were made, if an additional payment is due with a request for extension of time to file a return or with the return, the payment must be made by check.

39. WHAT SHOULD I DO IF I OVERREPORTED OR UNDERREPORTED A TAX THAT I PAID BY EFT?

You must amend your tax return in the same manner that you would if you did not pay that tax by EFT. Any additional tax due must be paid by check or money order with the amended return.

EFFECT ON OTHER DOCUMENTS: IP 93(2.1), Q&A on Paying Taxes by Electronic Funds Transfer, is modified and superseded and may no longer be relied upon after the date of issuance of this Informational Publication.

EFFECT OF THIS DOCUMENT: An Informational Publication is a document that addresses frequently asked questions about a current Department position, policy or practice, usually in a less technical, question-and-answer format.

FOR FURTHER INFORMATION: Call the EFT Unit, at 860-297-4973 during business hours,  Monday through Friday.

FORMS AND PUBLICATIONS: Forms and publications are available 24 hours a day, seven days a week:

  • Internet: Preview and download forms and publications from the DRS website;
  • Telephone: Call 1-800-382-9463 (toll-free from within Connecticut), or 860-297-5962 (anywhere) and select Option 2 from a touch-tone phone or;
  • Telecommunications Device for the Deaf (TTY, TDD and Text Telephone) users only, call 860-297-4911.

IP 99(16)
Electronic Funds Transfer
Issued: 05/18/99