This Informational Publication has been superseded by IP 93(2.1)
Q & A on Paying Taxes by Electronic Funds Transfer
In its May 1992 Special Session the Connecticut General Assembly passed legislation that permits the Department of Revenue Services to require certain taxpayers to pay their taxes by electronic funds transfer (EFT) instead of by check. Generally speaking, taxpayers whose liability for a particular tax exceeds $500,000 per year will be required to pay that tax by EFT.
This publication provides basic information about EFT.
1. What is an Electronic Funds Transfer?
Electronic Funds Transfer (EFT) is an electronic method of transferring a payment that replaces conventional check-writing. One way that EFTs are handled is through the Automated Clearing House system (ACH), a nationwide network that electronically transfers funds. Common applications for the ACH are direct deposit of payroll and social security benefits, payment of taxes, and automatic payment of life insurance premiums. The clearing facilities, delivery methods and settlement services operated by the Federal Reserve system are utilized within the ACH network in order to maintain security and to increase the efficiency of transactions.
2. How was I chosen to participate in the EFT program?
Public Act 92-17, passed by the Connecticut General Assembly in its May 1992 Special Session, authorizes the Department of Revenue Services, like the revenue departments of many other states, to require certain taxpayers to pay their taxes by EFT. This law provides that the Department may require those taxpayers whose tax liability for a particular tax type exceeded $500,000 during the past year to pay that tax by EFT. The Department has reviewed your filing record for the past year and has determined that you are required to pay that tax by EFT.
3. Will I be required to pay tax by EFT indefinitely?
No. Your tax liability will be reviewed annually. You will be notified if you are no longer required to pay by EFT, but you must continue to pay by EFT until you are so notified.
4. May I demonstrate that I am not required to pay tax by EFT?
Yes. You must prove that your tax liability for a particular tax did not exceed $500,000 during the past year.
5. What EFT methods may I use to pay my taxes?
You may use either of two methods: the ACH Debit method or the ACH Credit method.
6. How does the ACH Debit method work?
To use the ACH Debit method, you simple place a toll-free call to the Department's Service Bureau. Through either the touch-tone menu or the Service Bureau operator, you authorize the amount of the payment and the date of transfer. You will also furnish your Connecticut tax registration number, the tax type and the tax return filing period. Your telephone call functions as an authorization to the Department's Service Bureau to arrange an EFT that will move the tax payment from your bank to the Department's bank.
7. If I authorize the Department to debit my account to pay my taxes as the ACH Debit method requires, will the Department be able to access my bank account for any other purposes?
No. The Department will not have access to your account. You must initiate any payments. Access codes and passwords ensure that only you can authorize the transfer of funds from your bank account to the Department's bank account and that the funds are applied to the proper tax account.
8. How does the ACH Credit method work?
To use the ACH Credit method, you (and not the Department) initiate the EFT. In doing so, you will furnish your bank with your Connecticut tax registration number, the tax type, tax return filing period, the amount of the payment and the date of transfer.
First, however, you must ensure that your bank can perform its part of the transaction using the ACH standard CCD + TXP format. (The bank must complete its portion of your Form EFT-1 (Authorization Agreement for Electronic Funds Transfers), verifying its ability to conform to these standards. You then send the completed Form EFT-1 to the Department's EFT Unit.) If your bank cannot conform to the CCD + TXP format, you must use the ACH Debit method.
9. In both ACH Debit and Credit transactions, when are the funds actually withdrawn from my bank account?
If you initiate a transaction on time, the funds will be withdrawn from your account on the due date.
10. What are the advantages of the ACH Debit method?
ACH Debit transactions can be virtually error-free when sent to the banking system because extensive editing and data correction can be performed before the EFT is initiated. ACH debit transactions limit your responsibility. After you make the authorization telephone call, your responsibility is discharged, and the Department or the Department's Service Bureau is responsible for the successful completion of the transaction.
During the authorization telephone call you may request a verification or acknowledgment code indicating that you have fulfilled your responsibility to make payment in a timely manner.
The costs of ACH Debit transactions are borne primarily by the Department.
11. Which payment method does the Department recommend?
The Department recommends using the ACH Debit method. Experience in other states shows that, with the ACH Debit method, there are likely to be fewer errors made in transmitting information. Also, with the ACH Debit method, the cost of the transaction is borne primarily by DRS. With the ACH Credit method, all costs are borne by the taxpayer.
12. Will I get any written verification or acknowledgment from the Department if I make an ACH Debit or an ACH Credit transaction?
13. May I change my EFT method at any time?
You may change your payment method only with the prior approval of the Department's EFT Unit.
14. May I use any other EFT methods besides the ACH Debit and ACH Credit methods?
15. What can I do if an emergency prevents me from making a timely EFT using the ACH Debit or ACH Credit method?
Contact the EFT Unit immediately for instructions. You may be permitted to make your payment using the Fedwire method. If it is not established to the Department's satisfaction that an emergency exists, your payment by Fedwire will be treated as a late payment.
16. Is it possible to change an EFT?
Yes, but only on or before the cut-off time on the same day that the EFT was made. Follow the instructions of the Department's Service Bureau, if the transaction to be changed was an ACH Debit transaction. Follow the bank's instruction if the transaction to be changed was an ACH Credit transaction. Contact the Department's EFT Unit if an error in payment is discovered too late to change the EFT.
17. May I pay in advance by certified check if I am supposed to pay by EFT?
No. Payment by certified check will not meet your obligations to pay by EFT and will be treated as a late payment.
18. Is there a penalty for a late tax payment by EFT?
Yes. A late tax payment by EFT is subject to the same penalty as any other late tax payment. In cases where payment is delayed for reasons beyond your control, you must submit proof that you exercised due diligence.
19. Am I subject to penalties if the Department and/or the Department's bank makes an error in initiating an EFT?
No. When you use the ACH Debit method, responsibility for the successful completion of the transaction is shifted to the Department's Service Bureau as soon as you make the authorization telephone call. But note that when you use the ACH Credit method, you and your bank are responsible for the transaction, and you will be subject to penalties if your bank makes an error in initiating an EFT.
20. How do I prove I made a timely ACH Debit transaction?
ACH Debit transactions always generate an acknowledgment from the Department's Service Bureau indicating the time and date of the authorization telephone call.
21. How do I prove I made a timely ACH Credit transaction?
You must submit documentation from your bank indicating that your bank account was debited on or before the due date.
22. How will I be notified of underpayments?
You will receive a billing through the Department's normal billing cycle. All billings will provide names and telephone numbers of persons to be contacted if you have billing questions.
23. Do I pay billings by EFT?
No. EFT is used only to pay the amount of tax that you originally report to be due on a tax return. Billings will continue to be payable by check.
24. How will I be notified of overpayments?
You will be notified of any overpayment of tax either by telephone or in writing.
25. May I use the EFT overpayment on my next return?
Yes. When you are notified, you can decide whether to apply the EFT overpayment to your next EFT return.
26. Will overpayments be refunded?
Yes, but only if you request a refund.
27. How do I report no tax due?
Using the ACH Debit method, report - 0 - tax payment to the Department's Service Bureau. Using the ACH Credit method, a - 0 - dollar amount will be sent through ACH with the appropriate addenda information. In either case, a "no tax due" return must be timely filed.
28. Do I file tax returns at the same time that I pay my taxes by EFT?
Tax returns must be filed on or before the due date and, if mailed, must bear a United States Postal Service cancellation mark that is dated on or before the due date.
29. Are there penalties for late filing of the tax return?
Yes. There is a $50 penalty for the late filing of a tax return, even if the corresponding payment of tax by EFT is timely made.
30. Are there exceptions to the requirement to file tax returns?
Yes. Employers paying withholding tax by EFT need not file withholding coupons (Forms CT-WH); however, they must still file quarterly and annual withholding tax reconciliations (Forms CT-941 and CT-W3, respectively). If additional payment is due with Form CT-941, this payment must be sent by check.
31. If I am required to pay a particular tax by EFT, may I pay other taxes by EFT?
Yes, but you must first contact the EFT Unit for information on voluntary payment of taxes by EFT.
32. May my paid preparer or accountant serve as my primary EFT contact person?
No. The primary contact person must be someone within your company who will be directly involved in all phases of the registration, systems implementation and tax payment process.
33. If I have a problem contacting the Department's Service Bureau for an ACH Debit transaction, whom should I call?
Contact the EFT Unit in sufficient time to correct the problem.
34. If, after my tax return has been filed, I discover that I have over reported or underreported a particular tax that I pay by EFT, whom should I call?
Your tax return must be amended in the same manner as if you did not pay that tax by EFT. That is, you must file a tax return, with the caption "AMENDED" written across the top, reporting the correct tax. Any additional tax due is payable by check.
35. How do I report changes in Registration information that I entered on Form EFT-1?
You report a change in your EFT method or bank information by sending a completed Form EFT-1 (with the caption "AMENDED" written across the top) to: Department of Revenue Services, EFT Unit, P.O. Box 2937, Hartford, Connecticut 06104-2937. You report other changes in registration information (e.g., change of address or EFT contact person(s)) by contacting the EFT Unit, preferably in writing.
36. When do I call my bank or the Department's Service Bureau, as the case may be, if the due date for payment falls on a weekend or legal holiday?
When a due date falls on a weekend or legal holiday, payment is due the first business day following the Saturday, Sunday, or legal holiday. You must initiate the EFT by calling either your bank or the Department's Service Bureau on the last banking day prior to the weekend or holiday. Legal holidays are New Year's Day, Martin Luther King Day, Lincoln Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving and Christmas.
* For current year's holiday schedule, call the EFT Unit.
37. May I make multiple payments by EFT?
Yes. If you use the ACH Debit method, after you make the first EFT, tell the operator that you wish to make another EFT. The process will begin according to the instructions of the Department's Service Bureau. If you use the ACH Credit method, you initiate the multiple EFTs through your originating bank.
38. How may I contact the EFT Unit?
The EFT Unit may be contacted by telephone at 203-297-4973 or by fax at 203-297-4929.
RELATED FORMS AND PUBLICATIONS:
SN 92(26), Payment of Connecticut Taxes by Electronic Funds Transfer
PLEASE NOTE THE FOLLOWING NEW INFORMATION ABOUT DRS.
FOR FURTHER INFORMATION: To order forms and publications or for further information, call the Department of Revenue Services at 860-297-5962 (Hartford area or out-of-state) or 1-800-382-9463 (in-state). Forms and publications may be ordered through voice-mail 24-hours a day by choosing Option 3 on your touch tone telephone.
Electronic Delivery Options: You can also obtain tax forms and publications 24-hours a day from our Web home page at http://www.ct.gov/drs. Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.