Small-business owners unhappy about having to file their federal
taxes electronically have won a reprieve via the tax bill recently
passed by Congress and signed by President Clinton.
The IRS began requiring any business paying more than $47
million annually in payroll taxes to pay them through the
Electronic Federal Tax Payment System (EFTPS) starting in 1996.
That figure was scheduled to drop to $50,000 by January 1, 1997.
And that's what set off the fireworks.
Reacting to complaints from small businesses concerned about
having to pay bank fees or content with the paper payment system,
Congress pushed the deadline back to July 1, 1997. Then Vice
President Gore announced another six-month delay of the filing
mandate. In the bill just passed, Congress pushed the deadline back
again--this time to June 30, 1998, and President Clinton did not
object.
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David D'Onofrio, director of government and public affairs
for National Small Business United (NSBU), hopes the delay will be
used to build support for the House and Senate bills that would
make electronic payment of payroll taxes voluntary for small
businesses below a certain threshold.
H.R. 722, sponsored by Rep. Doc Hastings (R-WA), sets the
threshold at $47 million a year in payroll taxes; below that,
electronic filing would be voluntary. In S.570, Sens. Don Nickles
(R-OK), and John Breaux (D-LA) set a $5-million-a-year threshold
and establish a five-year phase-in for businesses above that
amount. Besides NSBU, the U.S. Chamber of Commerce, the National
Federation of Independent Businesses and the National Restaurant
Association support the bills.
"Filing taxes electronically might very well be an option
that many businesses would find helpful," says Nickles, who
chairs the Senate Finance Committee's Subcommittee on Taxation
and IRS Oversight. "But that should be a choice the individual
makes based on what is best for his or her business."
The electronic system allows businesses to pay taxes by
telephone or computer through either debit or credit. Using the
debit option, a taxpayer asks a financial agent of the Treasury
Department to transfer funds from the taxpayer's bank account
to the Treasury's general account. With the credit option, the
taxpayer's financial institution transfers the funds.
Randy Mason, co-owner of Salem, Virginia-based Mason Mechanical
Laboratories, testified to the House Ways & Means Subcommittee
on Oversight that filing electronically would cost him either $120
or $600 a year in fees, depending on which option he chose.
"I'm also concerned about the disappearance of a paper
trail, which could help me defend myself in [the event of] an
audit," Mason adds.
In a letter to Sen. Nickles, acting IRS commissioner Michael P.
Dolan said nearly 1.2 million businesses pay between $50,000 and
$47 million in payroll taxes; 1.1 million of those are already
enrolled in the EFTPS.
Mason, whose company employs 10 people, signed up for the EFTPS
in case the filing mandate took effect, though he doesn't
currently file electronically. "Just because 1.1 million
businesses signed up doesn't mean they like the
system."
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