Ms. Margaret Milner Richardson
Commissioner
Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, D.C. 20224

Dear Ms. Richardson:

The Treasury Management Association (TMA) has serious concerns regarding the failure of the Internal Revenue Service (IRS) to disseminate accurate and comprehensive information about payment mechanisms available through the Electronic Federal Tax Payment System (EFTPS). We are also alarmed that the IRS appears to have retreated from previously agreed upon payments principles and procedures which are critical to many corporate taxpayers.

TMA represents over 9,000 treasury professionals, many of whom are responsible for making federal tax payments on behalf of large corporate and middle market taxpayers.  Our Association has worked cooperatively with the IRS and the Financial Management Service (FMS) in support of efforts to automate federal revenue collection procedures.  We have expressed our concerns, however, when those procedures might impede the efficiency of the payment system and the integrity of its operation, and increase taxpayer burden.

TMA is dismayed by information currently being circulated by the IRS which undermines principles and procedures supported by TMA, adopted by the IRS, and confirmed to TMA in IRS letters and rulings. This information relates to:

• Use of same day tax payment mechanisms by mandated taxpayers.
• Equality of ACH credit and ACH debit as payment options.

Same Day Tax Payment Mechanisms

Same day payment mechanisms are needed by two categories of taxpayers on a non-emergency basis:

• Companies with $100,000 or more in payroll tax liability who are required to pay their  taxes one day after pay day but do not know the amount of their liability until tax due date;
• Companies who need to manage their cash flows and the timing of large funds        transfers.

The IRS had assured TMA that same day payment methods would be a payment alternative for mandated taxpayers.  However, a same day payment mechanism is not listed as an option in EFTPS Business Enrollment Form 9779, Item 10, "Remittance Method."  The instructions that accompany the form state that "in some instances a business may find it necessary to make a same day payment" [emphasis added], strongly implying that same day payments are an exception procedure only.

Information received through the EFTPS Hotline confirms this impression.  A TMA member who is a 1997 mandated taxpayer called an EFTPS Hotline Number, 1-800-945-8400, to inquire about Fedwire and was told that it could be used in emergencies only, not as a primary payment method.

When we asked an IRS official what advice TMA should give taxpayers wishing to choose a same day payment method on Form 9779, TMA was told that taxpayers should "write in" their selection, clearly not a realistic alternative on an electronically scanned document.

The IRS's statement on its instruction sheet that "further information on same day payments will be provided in your enrollment confirmation package" fails to clarify the matter or educate the taxpayer seeking information on how to select a same day payment method.

TMA recommends that the IRS:

• Revise Business Enrollment Form 9779 to include a same day payment option for mandated taxpayers.
   
• Revise Instructions for Form 9779 to clarify and explain the availability of same day payment mechanisms for mandated taxpayers.
   
• Issue a notification to Depository Institutions to clarify the availability of same day payment methods.
   
• Issue a notification about same day payment methods to associations for communication to their members.

Distinctions in Liability for ACH Credit and ACH Debit Payments

The IRS continues to unjustifiably discourage use of ACH credit payments in the information it selects to disseminate to taxpayers about ACH credit procedures and liability.

In the newly issued EFTPS: Answers to the Most Commonly Asked Questions, repeated references are made to the acknowledgment number provided by the Treasury Financial Agent for ACH debit payments.  No mention is made of the fact that taxpayers using ACH credits can obtain the same "transaction reference number" by phoning the Treasury Financial Agent.

If this phone service for ACH credit payers is available, it should be included in IRS descriptions of EFTPS.  If it is not available, a correction should be issued by Treasury to depository institutions and associations to whom the service has been announced.

The same publication, EFTPS: Answers to the Most Commonly Asked Questions, explains that it is easier for a taxpayer to verify to the IRS that a payment was timely made through an ACH debit than through an ACH credit.  With respect to an ACH credit, the IRS continues, "the taxpayer generally will need to provide bank records showing that funds were received by the U.S. government."

Only the U.S. government's bank statement would show that the U.S. government received the funds.  Taxpayers can only produce their own bank's records and statements to prove that they provided the bank with a correct and timely payment instruction, that there were sufficient funds in their account, and that their account was debited.  These are, in fact, the requirements stated in IRS Revenue Procedure 94-48 Section 14, Proof of Payment, and in IRS Revenue Ruling 94-46 regarding the establishment of reasonable cause for abating the failure to deposit penalty, which makes no distinction between debits and credits.

TMA recommends that the IRS:

Revise and reissue all taxpayer information to reflect IRS Revenue Procedure 94-48 regarding proof of payment and Revenue Ruling 94-46 regarding the establishment of reasonable cause for abating the failure to deposit penalty, so that ACH credit payments are not disadvantaged. it is regrettable that the IRS's admirable electronic tax collection initiative should be marred by faulty execution that has subject it to recent public criticism.  TMA looks forward to working with the IRS in its effort to educate taxpayers in a thorough, clear and timely manner regarding the operations and advantages of EFTPS.  We would appreciate your comments on the issues discussed in this letter.

Sincerely,

/s/ Thomas D. Logan, CCM
Treasurer
Basic American, Inc.
Chair, Government Relations Committee
Treasury Management Association

/s/ Frank P. Curran
Vice President
Government Relations and Technical Services
Treasury Management Association

cc:
Lillie McCracken, Internal Revenue Service
Russell D. Morris, Financial Management Service