The Commissioner of Revenue is authorized to prescribe which taxpayers or classes of taxpayers must make payments of taxes to designated banks and the method or methods of making such payments. G.L. c. 62C, § 45. In addition, effective July 1, 1992, the Commissioner may provide for payment of any tax, interest or penalty by the electronic transfer of funds, and may establish procedures necessary to implement such transfers. G.L. c. 62C, § 78 (as enacted by St. 1992, c. 133, § 397).
This Technical Information Release (TIR) announces and explains procedures prescribed by the Commissioner for payment of wage withholding taxes through the Massachusetts Department of Revenue Electronic Funds Transfer (EFT) program. As of January 1, 1995, payment of wage withholding taxes through the EFT program is mandatory for employers required to file weekly with $500,000 or more of withholding taxes in the preceding taxable year. In addition, as of January 1, 1994, any taxpayer with $25,000 or more of withholding taxes in the preceding taxable year may voluntarily apply to pay wage withholding taxes through EFT. Such applications are subject to the Commissioner's approval.
II. Program Participation
A. The 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 the tax payment.
B. Mandatory Participation. As of January 1, 1995, all taxpayers with withholding tax liabilities of $500,000 or more for the preceding taxable year are required to make all weekly depository payments through the Department's EFT program. Participants are subject to the procedures described below.
C. Voluntary Participation. As of January 1, 1994, any taxpayer with $25,000 or more withholding tax liabilities for the preceding taxable year may submit an application to participate in the Department's EFT program on a voluntary basis. A taxpayer's application is subject to the Commissioner's approval, with computer capability being the most important factor in the Commissioner's determination. Once a taxpayer is registered as a voluntary participant, the taxpayer is subject to the same procedures applicable to mandatory participation.
D. Waivers and Withdrawals from Participation. Any taxpayer who receives notice from the Department that mandatory participation in the EFT program is required, may request a waiver from participation in the program by writing to the Department's EFT Unit. A waiver from participation will be granted to mandatory participants only if the Commissioner determines that the taxpayer's withholding tax liability for the previous year did not, in fact, equal or exceed $500,000. A waiver from participation will be granted to voluntary participants upon request, but participation may be required through the calendar year in which the request is received. Also, the Commissioner may withdraw approval of any taxpayer's participation in the EFT program.
III. Registration Requirements
A. Application to the EFT Program. 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, federal identification (FID) number, tax type, tax period end date, payment amount and financial institution.
If a taxpayer has one withholding tax account that satisfies the mandatory participation threshold and additional withholding tax accounts with less than the mandatory threshold, the taxpayer may voluntarily participate in the EFT program with the additional accounts, provided that each additional account is listed on the taxpayer's EFT application and is approved by the Department's EFT Unit.
B. Approval by the 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 payment record format and a designated date for each account to begin participation in the EFT program.
C. Payments through Financial Institution. Before submitting an application to the Department, each taxpayer should confirm with its financial institution that such institution will comply with all electronic funds transfer requirements of the Department. Also, before making its first EFT payment to the Department, the taxpayer must provide to its financial institution all relevant information, including the Department's individualized sample EFT payment record format.
IV. EFT Payment Procedures
A. All Tax Payments through EFT. Once a taxpayer is participating in the EFT program, all withholding and other approved tax payments for that taxpayer's account(s) must be made through the program. The Automated Credit House (ACH) credit transaction method 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. Payment Due Date. To be timely paid, a tax payment must be in the Commonwealth's designated bank account by the statutory payment due date for each tax period. The EFT program does not change any requirements of the Commonwealth's tax laws. A taxpayer should determine with its financial institution when to originate its tax payment so that it will be made to the Commonwealth's designated bank account by the statutory payment due date.
C. Account Information. To ensure that a tax payment is credited to the proper account, a taxpayer must use exactly the same information as on the taxpayer's application. (For example, if an EFT application 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.) Any changes from the information listed on a taxpayer's application must be reported immediately to the Department's EFT Unit.
V. Filing Tax Returns
Tax Returns. A taxpayer must still file with the Department by the statutory due date all required tax returns or amended tax returns. For example, a taxpayer making weekly 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 tax return will subject the taxpayer to penalty charges.
A taxpayer making weekly tax payments through the EFT program ordinarily does not file a weekly payment coupon voucher (Form M-941W). However, in instances where an EFT payment cannot be made, the Commissioner may accept a payment coupon voucher accompanied by a check or other form of payment by the payment due date for that tax period.
VI. Problem Solving Procedures
A. Notification of EFT Payment Errors. If a taxpayer discovers that an error has been made in an EFT payment, the taxpayer must notify the Department's EFT Unit immediately and also must contact its financial institution. If the Department finds a recurring error in EFT payments, the EFT Unit will notify the taxpayer. A taxpayer's financial institution should provide written verification of all EFT transactions to the taxpayer.
In general, if an overpayment is made to the Department through the EFT program, the overpayment automatically will 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). At this time the Department does not return payments electronically through the EFT program.
B. Late EFT Payments. If an EFT payment is received by the Department after the due date for that tax period, the taxpayer is subject to late payment penalties and interest. However, the penalty for a late payment may be waived or abated if a taxpayer files with the Department a waiver of penalty request or an abatement application (Form CA-6) and establishes reasonable cause for the late payment.
For further information, taxpayers may contact the Department's EFT Unit, 100 Cambridge Street, Boston, MA 02204, telephone number (617) 727-7445, or FAX (617) 727-0379.
/s/ Mitchell Adams
Commissioner of Revenue
February 4, 1994