DRS: IP 2002(17), Paying Connecticut Taxes by Electronic Funds Transfer

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

450 Columbus Blvd
Hartford CT 06103
 
 
 
 
 
 

 
 

This Informational Publication has been modified and superseded by IP 2003(25)

IP 2002(17)

Paying Connecticut Taxes by Electronic Funds Transfer


Purpose: This Informational Publication explains the requirement for paying taxes electronically.


Effective Date: Upon issuance.


Statutory Authority: Conn. Gen. Stat. ßß12-685 to 12-689, inclusive; Conn. Agencies Regs. ßß12-689-1 to 12-689-4, inclusive.


1.   What is an electronic funds transfer?

Electronic Funds Transfer (EFT) is an electronic method of making a payment that replaces having to write a check.  An EFT is handled through the Automated Clearing House System (ACH), a nationwide network that electronically transfers funds.  Direct deposit of payroll and social security benefits, payment of taxes, and automatic payment of life insurance premiums are common applications of ACH.  The clearing facilities, delivery methods, and settlement services operated by the Federal Reserve System are used within the ACH network to maintain security and increase the efficiency of transactions.


2.   Who must pay by EFT?

Taxpayers whose prior year liability for a particular tax exceeded $100,000 and who are notified by the Department of Revenue Services (DRS) to pay a tax by EFT must pay that particular tax by EFT.


3.   Will I always be required to pay that tax by EFT?

No.  DRS will review your tax liability on an annual basis.  You will be notified by DRS if you are no longer required to pay by EFT, but you must continue to pay by EFT until DRS notifies you that you no longer are required to do so.


4.   May I prove that I am not required to pay the tax by EFT?

Yes, but you must show the DRS EFT Unit that your tax liability for a particular tax in the prior year was not greater than $100,000.


5.   May I make payments using EFT even though I am not required to do so?

Yes, but you must first contact the DRS EFT Unit to register for voluntary payment of taxes by EFT.


6.   What methods may I use to pay my taxes by EFT?

You may use one of two methods to pay your taxes by EFT:

  • The ACH Debit Method, or

  • The ACH Credit Method.


7.   Do I have any other choices for paying my taxes electronically?

Yes.  If you have a sales tax, business use tax, room occupancy tax, or Connecticut withholding tax payment to make, you may make the payment by Fast-File.


8.   What is Fast-File?

Fast-File is an easy way to electronically file a tax return for any eligible tax by using the telephone or the Internet.  (Eligible taxes are sales tax, business use tax, room occupancy tax, and Connecticut withholding tax.)  However, you may not use Fast-File to electronically file any tax return to which you must attach any supporting documentation or to file any past due returns.  Fast-File also allows you to electronically pay any eligible tax.  Fast-File is available 24 hours a day, 7 days a week.  You may access Fast-File by the Internet at: http://www.ct.gov/drs (click on the Business Taxes Fast-File Program button), or by telephone at 860-947-1988.

If you are required to pay any eligible tax by EFT, or if you are registered with DRS for voluntary payment of any eligible tax by EFT, you may use Fast-File:

  • Solely to electronically file the tax return.  (You must use your previously chosen EFT method to electronically pay the tax); or

  • Both to electronically file the tax return and to electronically pay the tax.

However, you may not choose to file a paper return for an eligible tax and use Fast-File to electronically pay the tax.

If you are not required to pay any eligible tax by EFT, and are not registered with DRS for voluntary payment of any eligible tax by EFT, choosing Fast-File requires you both to electronically file the tax return and to electronically pay the tax.


9.   How does the ACH Debit Method work?

With the ACH Debit Method, you authorize DRS to initiate the EFT by providing the amount of the payment and the date of transfer. If you are making a payment of an eligible tax, you initiate the EFT either by using Fast-File, which uses the ACH Debit Method, or you make a toll-free call to the DRS Service Bureau. If you are not making a payment of an eligible tax, you initiate the EFT by making a toll-free call to the DRS Service Bureau. If you call the DRS Service Bureau, you may use either the touch-tone menu or speak to the service bureau operator to authorize the amount of the payment and the date of transfer.


10. How does the ACH Credit Method work?

With the ACH Credit Method, you (not DRS) initiate the EFT through your own bank.  In coordination with your bank, you will format your payment, your Connecticut tax registration number, the tax type, and the tax return filing period.  You must ensure that your bank can perform its part of the transaction using the ACH standard CCD + TXP format; otherwise, you must use the ACH Debit Method.


11. What are the advantages of the ACH Debit Method?

ACH Debit transactions can be error-free when sent to the banking system because extensive editing and data correction can be performed before the EFT is initiated.  When using Fast-File, you are given a confirmation number to verify that your tax return has been filed.  When calling the DRS Service Bureau, you are given a trace number to verify that you have initiated your payment.  ACH Debit transaction fees are paid primarily by DRS.


12.   Which payment method does DRS recommend?

DRS recommends using the ACH Debit Method because fewer errors are made in transmitting information and DRS primarily pays the fees.  With the ACH Credit Method, the taxpayer pays all the fees.


13.   If I authorize DRS to debit my account to pay my taxes, can DRS access my bank account for any other purpose?

No.  DRS will not have access to your account for any other purpose.  You must initiate any other payments.  Access codes and passwords ensure that only you can authorize the transfer of funds from your bank account to DRSís bank account and that the funds are applied to the proper tax account.


14.   May I use other EFT methods besides the ACH Debit and ACH Credit Methods?

No.


15.   May I change my EFT method at any time?

Yes, but only with prior approval from the DRS EFT Unit.


16.   How do I register for EFT?

Complete Form EFT-1, Authorization Agreement for Electronic Funds Transfers, indicating your choice of EFT method and providing the required bank information.  After receiving your completed Form EFT-1, DRS will send additional information and instructions to your designated contact person.  If you are using Fast-File to file your tax return and initiate payment of an eligible tax and you are not required to pay that tax by EFT, you do not need to pre-register by completing Form EFT-1.


17.   May my paid preparer or accountant serve as my primary EFT contact person?

Yes.  DRS recommends, however, that your primary contact person should be the person that makes the EFT payments.  In designating a contact person, remember that you are responsible for the timely payment of your taxes even if you designate someone else as your contact person.


18.   How do I report changes in the registration information that I entered on Form EFT-1?

You must contact the DRS EFT Unit at 860-297-4973 to report a change in your EFT method, bank information, or other changes in your registration information.


19.   What are the due dates for paying by EFT?

  • If you are required to pay a tax (other than withholding tax) by EFT, DRSís bank account must be credited for the amount of your payment on or before the due date.

  • If you are required to pay Connecticut withholding tax by EFT, DRSís bank account must be credited for the amount of your payment on or before the next business day following the due date.

  • If you are registered with DRS for voluntary payment of a tax, DRSís bank account must be credited for the amount of your payment on or before the next business day following the due date.


20.   Is there a penalty for a late tax payment by EFT?

Yes.  Effective for taxes first due and payable on or after October 1, 1998, penalties for late EFT payments are:

  • 2% of the tax due for EFT payments that are not more than 5 days late;

  • 5% for EFT payments that are more than 5 days but not more than 15 days late; and

  • 10% for EFT payments that are more than 15 days late.

Interest is charged at the rate of 1% per month or fraction of a month from the due date until the date of payment. 

If payment is delayed for reasons beyond your control and you are able to prove to the satisfaction of DRS that you exercised due diligence, the penalty may be waived.


21.   May I pay in advance by check if I am required to pay by EFT?

No.  Payment by check does not meet your obligation to pay by EFT and subjects you to a 10% penalty, even if DRSís bank account is credited for the payment on or before the due date.


22.   Will I get any written verification or acknowledgment from DRS if I make an ACH Debit or an ACH Credit Transaction?

No.


23.   How do I prove I made a timely ACH Debit transaction?

Your bank account will show a debit on or before the due date.


24.   How do I ensure that my payment is paid timely?

If you use the ACH Debit Method, you must initiate your transaction no later than 4:30 p.m. Eastern Time on the last banking day prior to the due date.  If you use the ACH Credit Method, you should consult your financial institution for information.


25.   When is the payment due if the due date falls on a weekend or legal holiday?

If the due date falls on a Saturday, Sunday, or legal holiday, the next business day is the due date.  For an ACH Debit transaction, you must initiate the EFT no later than 4:30 p.m. Eastern Time on the last banking day prior to the weekend or holiday.  For an ACH Credit transaction, contact your bank for information.  Legal holidays are New Yearís Day, Martin Luther King Day, Lincolnís Birthday, Washingtonís Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteransí Day, Thanksgiving, and Christmas.  For this yearís holiday schedule, call the EFT Unit.


26.   If I have a problem initiating an ACH Debit transaction, whom should I call?

If you have a problem initiating an ACH Debit transaction, contact the DRS EFT Unit in sufficient time to correct the problem.


27.   How do I prove I made a timely ACH Credit transaction?

You must submit documentation from your bank showing that your payment was initiated in time for settlement into our bank account on or before the due date.


28.   When are the funds actually withdrawn from my bank account?

For ACH Debit transactions, you determine the date of withdrawal by the effective date that you enter when initiating your transfer.  For ACH Credit transactions, you must contact your financial institution for withdrawal dates.


29.   If I use the ACH Debit Method, may I make my authorization call early and not have my bank account debited until the due date?

Yes.  Your payment information may be warehoused for up to 30 days.  Your payment will not be withdrawn from your account until the date you specify as an effective date.


30.   May I make multiple payments by EFT?

Yes.  For the ACH Debit Method, follow system instructions.  If you use the ACH Credit Method, you initiate multiple payments by EFT through your originating bank.


31.   What can I do if an emergency prevents me from making a timely EFT payment using ACH?

Contact the DRS EFT Unit immediately for instructions.  You may be permitted to make your payment using the Fedwire method.  If DRS is not satisfied that an emergency exists your payment by Fedwire will be treated as a late payment.


32.   Is it possible to cancel or correct an EFT?

Yes.  You can cancel or correct an ACH Debit transaction before the cut-off time on the day that you initiated the transaction.  Contact the DRS EFT Unit if a payment error is discovered too late to change the EFT.  For an ACH Credit transaction, follow your bankís instructions.


33.   How do I report no tax due?

If you do not owe any tax, an EFT is not required.  However, a return must be timely-filed even if no payment is due.


34.   How am I notified of underpayments?

DRS will send you a bill through the normal billing cycle.  All bills provide the name and telephone number of the person to contact if you have questions.


35.   May I pay bills by EFT?

Payments of bills for Connecticut withholding tax, corporation business tax, and insurance premiums tax must be remitted by check.  For all other taxes, you may pay bills by EFT.  However, to ensure proper application of payment, a separate EFT must be made for each tax period.  Fast-File is only for timely payment associated with filing a current return for an eligible tax.


36.   What if I make an overpayment?

If there is an overpayment, you will be notified or the funds will be refunded.


37.   May I apply an EFT overpayment to my next return?

Yes.  You may request to have the overpayment applied to your next EFT return.


38.   When is my tax return due?

Your tax return is due on or before the due date.  Your return will be filed timely if received or if the date shown by the U.S. Post Office cancellation mark is on or before the due date.  If the due date falls on a Saturday, Sunday, or legal holiday, the next business day is the due date.


39.   Is there a penalty imposed for the late filing of a tax return if payment of the tax is timely made?

The Commissioner of Revenue Services may impose a $50 penalty for the late filing of any return or report that is required by law to be filed.


40.   Are there exceptions to the requirement to file tax returns?

Yes.  If you are an employer paying withholding tax by EFT, you are not required to file withholding coupons (Forms CT-WH); however, you must still file quarterly and annual withholding tax reconciliations (Forms CT-941 and CT-W3).  If an additional payment is due with Form CT-941, you may make your payment by check, or by using Fast-File, you may file your Form CT-941 electronically and make the payment electronically.

Taxpayers are not required to file estimated tax coupons for Corporation Business Tax, Foreign or Domestic Insurance Premium Tax or Health Care Center Tax, when making estimated tax payments by EFT.   With respect to a tax for which estimated tax payments were made, if an additional payment is due with a request for extension of time to file a return or with the return, the payment must be made by check.


41.   What should I do if I over-reported or underreported a tax that I paid by EFT?

You must amend your tax return in the same manner that you would if you did not pay that tax by EFT.  You must pay any additional tax due by check or money order with the amended return.


Effect on Other Documents: Information Publication 99(16), Q & A on Paying Taxes by Electronic Funds Transfer, is modified and superseded and may no longer be relied upon.


Effect of This Document: An Informational Publication is a document issued by DRS that addresses frequently asked questions about a current position, policy, or practice, usually in a less technical question and answer format.


For Further Information on EFT: Call the DRS EFT Unit at 860-297-4973, during business hours, Monday through Friday, or email the EFT Unit at: ct.eft@po.state.ct.us.


Forms and Publications: Forms and publications are available all day, seven days a week:

  • Internet: Preview and download forms and publications from the DRS Web site: http://www.ct.gov/drs

  • Telephone: Call 860-297-4753 (from anywhere), or 1-800-382-9463 (toll-free within Connecticut) and select Option 2 from a touch-tone phone.


IP 2002(17)
Multiple Taxes
Electronic Funds Transfer
Issued: 09/10/2002