830 CMR 62C.00: STATE TAX ADMINISTRATION
830 CMR 62C.00 is amended by adding the following section:
830 CMR 62C.78.1: Massachusetts Electronic Funds Transfer Program
(1) Statement of Purpose; Effective Date; Outline of Topics.
(a) Statement of Purpose. The purpose of this regulation, 830 CMR 62C.78.1, is to explain the procedures prescribed by the Commissioner, pursuant to M.G.L. c. 62C, § 45, and M.G.L. c. 62C, § 78 (as enacted by St. 1992, c. 133, §397), for payment of withholding and other taxes through the Electronic Funds Transfer (EFT) program. As of January 1, 1995, payment of wage withholding taxes through the EFT program is mandatory for certain taxpayers. As of October 1, 1995, payment of corporate excise, gasoline and sales and use taxes through the EFT program is mandatory for certain taxpayers. As of January 1, 1994, taxpayers may voluntarily participate in the EFT program, subject to the Commissioner's approval, for payment of withholding taxes and, as of January 1, 1995, for other taxes.
(b) Effective Date. This regulation, 830 CMR 62C.78.1, will take effect upon promulgation.
(c) Outline of Topics. This regulation, 830 CMR 62C.78.1, is organized as follows:
(1) Statement of Purpose, Effective Date, Outline of Topics
(3) EFT Program Participation
(4) EFT Registration Requirements
(5) EFT Tax Payment Procedures
(6) Filing Tax Returns
(7) Problem Solving Procedures
(2) Definitions. For the purpose of this regulation, 830 CMR 62C.78.1, the following terms have the following meanings:
Automated Clearing House (ACH), any entity that operates as a clearing house to transmit or receive entries electronically, pursuant to an agreement with an association that is a member of the National Automated Clearing House Association (NACHA).
ACH Credit Transaction Method, one of the national standards of the banking industry to transfer funds electronically among banks using the Automated Clearing House (ACH) network. In an ACH credit transaction, a taxpayer through its bank originates an entry to credit a designated bank account and to debit its own bank account for the amount of tax payment.
Commissioner, the Commissioner of Revenue or the Commissioner's duly authorized representative.
Electronic Funds Transfer (EFT), a system used to transfer payments or funds electronically; any transfer of funds (other than a transaction originated by check, draft or similar paper instrument) that is initiated through an electronic terminal, telephonic instrument, computer or magnetic tape, to authorize a financial institution to debit or credit an account.
EFT Program, for Massachusetts tax purposes, payment of Massachusetts taxes by the transfer of funds electronically from a taxpayer's financial institution to the Commonwealth's designated depository bank, in accordance with this regulation and procedures prescribed by the Commissioner.
National Automated Clearing House Association (NACHA), the association that establishes the standards, rules and procedures that enable depository financial institutions to exchange ACH payments on a national basis.
(3) Electronic Funds Transfer (EFT) Program Participation.
(a) EFT program in general. Under the EFT program, taxpayers make payments of tax to the Department by the electronic transfer of funds. The EFT program uses the Automated Clearing House (ACH) credit transaction method of payment. A taxpayer who participates in the EFT program transfers funds by instructing its designated financial institution to credit the Commonwealth's depository bank and to debit the taxpayer's bank account for the amount of tax payment.
(b) Mandatory participation.
1. Withholding Payments. As of January 1, 2003, all taxpayers with wage withholding tax liabilities of $100,000 or more for the preceding taxable year are required to make all depository payments through the Department's EFT program.
2. Gasoline Tax Payments. As of October 1, 1995, all taxpayers with gasoline tax liabilities of $100,00 or more for the preceding taxable year are required to make all monthly tax payments through the EFT program.
3. Sales and Use Tax Payments. As of January 1, 2003, all taxpayers with sales and use tax liabilities of $100,000 or more for the preceding taxable year are required to make all tax payments through the EFT program.
4. Corporate Excise Payments. As of October 1, 1995, all domestic and foreign corporate taxpayers with corporate excise liabilities of $250,000 or more for the preceding taxable year are required to make all quarterly estimated tax payments through the EFT program. Also, certain other taxpayers (that is, banks, utilities and insurance companies) with corporate excise liabilities of $100,000 or more for the preceding taxable year are required to make all tax payments through the EFT program.
5. Other Mandated Participants. Taxpayers required, by a public written statement issued by the Department, to file tax returns by electronic means must participate in the EFT program if they are making payments.
6. Other Tax Payments, Revised Threshold Amounts. Any further expansion of the EFT program, either by including other tax types or by reducing mandatory filing thresholds, will be announced in advance by Technical Information Release or other Department of Revenue public written statement.
(c) Voluntary participation. As of January 1, 1994, any taxpayer with wage withholding tax liabilities of $25,000 or more (and as of January 1, 1995, any taxpayer with gasoline, sales and use tax, or corporate excise liabilities of $25,000 or more) in the preceding taxable year may submit an application to participate in the Department's EFT program on a voluntary basis. A taxpayer's request to participate in the EFT program is subject to the Commissioner's approval, with the taxpayer's EFT computer capability an important factor in that determination. Once a taxpayer is registered as a voluntary participant, the taxpayer may not withdraw from the program without approval and is subject to this regulation and the Department's procedures established for mandatory participation.
(d) Waiver and withdrawal from participation. A taxpayer may request a waiver from participation in the EFT program, as described below. The Commissioner may withdraw approval of any taxpayer's participation in the EFT program.
1. Mandatory participants. Any taxpayer who receives notice from the Department that mandatory participation in the EFT program is required may request a waiver from participation by writing to the Department's EFT Unit. A waiver from participation will be granted to mandatory participants in the EFT program only if the Commissioner determines that the taxpayer's withholding or other tax liability does not, in fact, equal or exceed the mandatory EFT payment threshold, described above. The taxpayer must continue participation in the EFT program until the Commissioner grants approval of the waiver.
2. Voluntary participants. Withdrawal from participation in the EFT program will be granted to voluntary participants upon request, but participation may be required through the calendar year in which the request is received.
(4) EFT Registration Requirements.
(a) Taxpayer Application for Electronic Funds Transfer (EFT).
1. Required information. A taxpayer must register for the EFT program, either for mandatory or voluntary participation, by submitting a completed, signed Application for Electronic Funds Transfer to the Department's EFT Unit. Required information for each tax account includes the taxpayer's name, address, contact person, telephone number, financial institution, federal identification number (FID), tax type, period end date and payment amount.
2. Multiple tax types. If a taxpayer has one type of tax liability that qualifies for mandatory participation and has different tax types with less than the mandatory threshold, the taxpayer may voluntarily participate in the EFT program with the additional tax types, provided that each additional tax type is listed on the taxpayer's EFT application and is approved by the Department's EFT Unit. The Department may refuse to process certain payments based upon the Department's technical capabilities.
(b) Approval by EFT Unit. The Department's EFT Unit will review each application and, upon approval, will provide to each taxpayer, in addition to the Department's EFT Handbook, an individualized sample of the taxpayer's EFT tax payment record format and a designated date for each tax type to begin participation in the EFT program.
(5) EFT Tax Payment Procedures.
(a) Tax payments through taxpayer's financial institution.
1. ACH credit transactions. Before submitting an Application for Electronic Funds Transfer to the Department, to ensure that EFT payments will be credited to the proper account each taxpayer should confirm with its financial institution that:
a. the financial institution has the capability and is willing to remit payments through the ACH network;
b. the taxpayer and its financial institution have a formal agreement, required by National Automated Clearing House Association (NACHA) regulations; and
c. the financial institution uses the standard record format for tax payments adopted by NACHA.
2. Taxpayer's information to its financial institution. Before making its first EFT payment to the Department, a taxpayer must provide to its financial institution all relevant information required in the Department's Application for Electronic Funds Transfer, including the Department's individualized sample tax payment record format.
3. Pre‑notification test. Before making a first EFT payment to the Department, a taxpayer's financial institution should conduct a pre‑notification test, which is a banking industry safeguard, to verify the Commonwealth's routing/transit number and bank account number. A pre‑notification test (or pre‑note test) is a zero‑dollar transaction processed at least ten days before the taxpayer's first EFT payment.
(b) Department's tax payment requirements.
1. All tax payments through EFT. Once a taxpayer is participating in the Department's EFT program, all withholding and other approved tax payments for that taxpayer's account(s) must be made through the EFT program.
2. Tax payment method.
a. ACH credit transaction method. The ACH credit transaction method of payment is the only payment method allowed by the Department's EFT program at this time. If no tax payment is due, no EFT transmission is necessary for that tax period.
b. Other. If an ACH credit payment cannot be timely made due to circumstances beyond the control of a taxpayer or the taxpayer's financial institution, the taxpayer must submit to the EFT Unit a coupon payment voucher with a check for the tax payment. The EFT program cannot accept payment by Fedwire.
3. Tax payment due date.
a. Timely payment. To be timely paid, a tax payment must be credited to the Commonwealth's designated bank account by the statutory payment due date for each tax period. The EFT program does not change any existing requirements of the Commonwealth's tax laws. A taxpayer should determine with its financial institution when to originate its payment so that it will be credited to the Commonwealth's bank account by the statutory due date.
b. Statutory due date. If the statutory due date for making a tax payment falls on a Saturday, Sunday or legal holiday, payment may be timely made on the next succeeding business day.
(c) Taxpayer's payment obligations.
1. Tax payment record format. A taxpayer should obtain from its financial institution specific procedures to report a tax payment. The taxpayer's financial institution transfers payments from the taxpayer's account to the Commonwealth's bank account through the ACH network, using the standard record format adopted for tax payments by NACHA.
2. Correct account information.
a. Correct format. To ensure that a tax payment is credited to the proper account, a taxpayer must submit information in exactly the same form as appears on the taxpayer's individualized sample of the tax payment record format, which is provided by the EFT Unit. For example, if a taxpayer's individualized sample is in the name of "New England Employers" and an EFT payment is made in the name of "N.E. Employers," the EFT payment cannot be recorded into the proper account.
b. Incorrect information. If the EFT Unit notifies a taxpayer that incorrect or incomplete information has been submitted, the taxpayer must submit the correct information with the next tax payment. If the taxpayer continues to submit incorrect or incomplete information, the Department may return the tax payment, which may cause a late payment penalty. See 830 CMR 62C.78.1(8)(b), below.
c. Changes. Any changes from information listed on a taxpayer's application or individualized sample (i.e., a change in its transmitting bank, corporate name, or filing frequency) must be reported immediately in writing to the EFT Unit.
3. Proof of tax payment. A taxpayer should obtain from its financial institution verification that the proper amount of tax payment was transferred from the taxpayer's account to the Commonwealth's account and that its tax payment was timely made. The taxpayer has the burden of proof of proper tax payments.
(6) Filing Tax Returns.
(a) Required tax returns. A taxpayer must still file with the Department by the statutory due date all required tax returns in the form required by the Commissioner. For example, at the present time, a taxpayer making weekly withholding tax payments through the EFT program must file a quarterly withholding tax return (Form M‑941D) and mark it with "EFT" in the upper right hand corner to ensure proper handling. Failure to file a required return will subject the taxpayer to late filing penalty charges. All tax payments, however, must be transmitted separately through the EFT program.
(b) Amended tax returns. If there is any change in a taxpayer's tax information, the taxpayer must file an amended tax return. However, any additional tax payment must be transmitted to the Department through the EFT program.
(c) Estimated payment coupon vouchers no longer needed. A taxpayer making tax payments through the EFT program no longer files a payment coupon voucher (for example, for withholding payments, Form M‑941W, and for corporate payments, Form 355‑ES). However, in instances where an EFT payment cannot be made, the Commissioner will accept a payment coupon voucher accompanied by a check or other form of payment by the payment due date for that tax period.
(7) Problem Solving Procedures.
(a) Notification of EFT tax payment errors. If a taxpayer discovers that an error has been made in an EFT tax payment, the taxpayer must notify the EFT Unit immediately and must contact its financial institution for correction procedures. If the Department finds a recurring error in EFT payments, the EFT Unit will notify the taxpayer. A taxpayer's financial institution should provide verification of all EFT transactions to the taxpayer.
(b) EFT overpayments. In general, if a taxpayer makes an overpayment to the Department through the EFT program, the overpayment will automatically be applied to the next tax payment. If a taxpayer wants a refund of an overpayment, the taxpayer must file an abatement application (Form CA‑6). However, an abatement application cannot be filed until the tax payment period is over and the reconciliation return (quarterly tax return) has been submitted. The Department cannot return payments electronically through the EFT program at this time.
(c) Late EFT payments. If the Department receives an EFT payment after the due date for that tax payment period, the taxpayer is subject to late payment penalties and interest. However, the penalty for a late EFT payment may be waived or abated if a taxpayer timely files with the Department a waiver of penalty request or an abatement application (Form CA‑6) and establishes reasonable cause for the late payment.
(a) Noncompliance. If a taxpayer is subject to mandatory participation in the EFT program and refuses to participate by remitting payment by other means (i.e., check, money order), the Department may return its payments, which may subject the taxpayer to penalties and interest. The Department will evaluate each case on an individual basis to determine whether failure to transmit payments by EFT was due to reasonable cause and not to willful neglect.
(b) Partial compliance. If a taxpayer is subject to participation in the EFT program, either on a mandatory or a voluntary basis, and submits payments without sufficient tax type codes or other information necessary to the implementation of the EFT program, the Department may return its payments, which may subject the taxpayer to penalties and interest. The Department will evaluate each case on an individual basis to determine whether failure to make proper payments by EFT was due to reasonable cause and not to willful neglect. The underpayment of tax also subjects a taxpayer to late penalty and interest charges.
(c) Denial or withdrawal of approval by the Commissioner. The Commissioner reserves the right to deny or withdraw approval of any taxpayer to participate in the EFT program.
Date of Promulgation: 6/30/95
Amended: 4/11/03 - section (3)(b)