EFTPS refers to Electronic Federal Tax Payment System. It is an online payments system created by the US Department of Treasury that allows individuals and organizations to make federal tax payments like income, employment, and excise electronically.
This system can be used by individuals, tax professionals, government agencies and business owners.
For business owners, EFTPS can act as a timesaver in terms of things like employment taxes, Medicare, and federal income.
How does EFTPS work?
Using EFTPS for tax payments consists of the following steps:
- Registration: A business’s registration process includes providing identification information like tax ID, banking details, etc.
- Making the payment: After registering, businesses can start making their payments.
- Scheduling the payment: EFTPS offers an option to schedule payments up to 365 days ahead.
- Confirming the payment: EFTPS immediately confirms the tax payments.
- Reporting the payment: EFTPS provides reports for businesses so that they can ensure they’re keeping with tax requirements.
Differences between EFTPS & direct pay
Both EFTPS and direct pay are forms of electronic payment systems offered by the US Department of Treasury to make federal tax payments. The two systems have certain differences, though:
- Fees: Both systems are free to use, but some financial institutions may charge a fee for processing EFTPS payments.
- Registration: EFTPS requires registration while direct pay does not.
- Tax payments: EFTPS can be used for different forms of taxes federal tax payments, while direct pay can only be used for individual tax purposes.
- Payment forms: Direct pay only allows immediate online payments as an option. EFTPS allows for different forms of payments in addition to direct online payment, like over the phone or via mobile devices.
Benefits & drawbacks of EFTPS
EFTPS can come with a lot of benefits, including convenience, security, flexibility, accuracy, and cost saving.
However, EFTPS can also come with its drawbacks. For example, some users have reported the platform to be unintuitive and difficult to use. Others find registration to be overly time consuming. Meanwhile, as mentioned earlier, some financial institutions may charge fees for processing EFTPS payments.
EFTPS and global workforce payments
One especially noticeable challenge with EFTPS concerns companies with global workforces. If you are a company headquartered outside the US with US-based employees, in addition to employees in other countries, using EFTPS can be time consuming and make it difficult to standardize the tax payment process for global payroll.
For these companies, global payment execution platforms may be the best bet, since they can offer additional services to smooth out the process, including multi-currency support, accounting software integration, and tax calculations.