TREASURY TAX AND LOAN
SPECIAL NOTICE TO DEPOSITARIES
Updated August 5, 1999
The Department of the Treasury (Treasury) has revised Volume IV of the Treasury Financial Manual (IV TFM.). IV TFM, last up-dated in 1992, provides financial institutions and depositaries instructions for processing tax deposits using the paper-based Federal Tax Deposit (FTD) system and for the Electronic Federal Tax Payment System (EFTPS). It also contains extensive re-formatting.
The following paragraphs highlight some common errors made by financial institutions and depositaries when processing tax deposits and payments in the EFTPS system. The Treasury requires that all financial institutions and depositaries follow Title 31 Code of Federal Regulations 203 (31 CFR 203) and the procedural instructions contained in IV TFM when processing Federal taxes for their customers. Treasury strives to ensure that there is integrity in these systems, that these systems are as error-free as possible and that all financial institutions and depositaries are treated equally. However, when errors are committed by financial institutions or depositaries, Treasury must monetarily penalize the financial institutions and depositaries for improper processing of FTD coupons and EFTPS deposits and payments. Treasury is providing the following highlights to assist in providing clear instructions to continue a smooth running and relatively penalty-free system.
The FRB identifies and corrects most errors made by depositaries in the paper-based FTD system without the taxpayer becoming aware of the error. These errors incur the following charges against the depositary: stale-dated (IV TFM 1-2135.30), un-dated (IV TFM 1-2135.50) and late
(IV TFM 1-2140) charges.
The taxpayer is the first to identify most EFTPS errors made by financial institutions and depositaries after the Internal Revenue Service (IRS) notifies the taxpayer a deposit is late. This may result in the financial institutions and depositaries having customer service problems. Since implementation of EFTPS in late 1996, Treasury has identified some common errors made by financial institutions and depositaries that can lead to penalties by the Treasury. Financial institutions and depositaries may want to implement the following suggestions.
Same-day deposits before 2:00 pm Managing Reserve Bank Head Office Local
Zone Time (MRB Head Office LZT).
A financial institution or depositary must send same-day Federal tax
payments so that the FRB receives them by 2 pm MRB Head Office LZT).
The FRB returns deposits received after 2 pm MRB Head Office LZT. It may assess interest against a financial
institution or depositary if the financial institution or depositary
initiated a deposit (which was subsequently returned) after 2 pm MRB
Head Office LZT AND the taxpayer met the financial institution's or
depositary's requirements as to timely notification. (See IV TFM
- Verifying the accuracy of the taxpayer's enrollment form.
A financial institution or depositary verifies the accuracy of its routing
transit number and the taxpayer's account number and account type. The
Treasury may assess a charge against a financial institution or depositary if
a payment is late because the financial institution or depositary provided
an incorrect account number on the enrollment form. This error could
occur because the taxpayer provided, but the financial institution or
depositary did not verify and correct, the number for an old, and
subsequently closed, account or an invalid account number on the
enrollment form. (See IV TFM 1-2230.20).
Also, financial institutions and depositaries should be aware that some EFTPS deposit operations may adversely affect their customers. To ensure smooth EFTPS processing:
- Identify EFTPS deposits on customer's statements.
If a taxpayer contests a late tax payment, IRS requires that the taxpayer prove a timely deposit. It may require a bank statement showing the tax deposit. Financial institutions and depositaries are encouraged to identify Federal tax payments on customers statements to assist in identifying tax deposits. Financial institutions and depositaries should use the term, "USATAXPYMT" to identify tax deposits. (See IV TFM 1-2240.10 and 1-2240.20 (4))
- Notify customers of returns or cancellations
ACH Debit: If Treasury's financial agent (TFA) returns a taxpayer's ACH debit, it notifies the taxpayer by first class mail of the return (Except for insufficient funds when the financial institutions and depositaries notify the taxpayer). Because notification by first class mail could take several business days, the financial institution or depositary should consider notifying taxpayers by phone, as a customer service gesture.
ACH Credit and Same-Day Deposits: Because of operational limitations,
TFAs are unable to notify taxpayers in any manner if a deposit is returned.
Financial institutions and depositaries should notify customers by phone
or other expeditious means of a returned or canceled ttax payment.
- Initiate Prenotifications for ACH Credit deposits.
Current regulations do not require prenotification for ACH credit deposits. However, Treasury strongly recommends that financial institutions and depositaries initiate a Zero Dollar Entry with TXP Addenda Record or a Prenotification Entry with the taxpayer identification number in the
Entry Detail Record.
- Initiate Same-Day deposits using Fedwire Non-Value (Typecode 1090).
Financial institutions and depositaries can use the FRB's Fedwire value transfer, Fedwire non-value transaction or the Fedline Taxpayer Deposit Application to initiate same-day deposits for their customers. If the initiator is a note option depositary, the FRB does not credit Fedwire (Typecode 1000) deposits to the depositary's note balance. Note option depositaries should initiate same-day deposits using the FRB's Fedwire non-value (Typecode 1090) or Fedline Taxpayer Deposit Application.
- Transfer deposits to Treasury on the customer initiated settlement date.
If a financial institution or depositary transfers EFTPS deposits to
Treasury before the customer initiated settlement date, it should notify the
customer immediately. It is not the design of the system, or Treasury's
intent, to accelerate deposits before the customer-initiated settlement date.
- Notify customers of pre-funding.
If a financial institution or depositary requires its customer to pre-fund an
account, it should ensure the taxpayer understands that the date the
financial institution or depositary debits the customers account, or puts a
hold on the funds, is not the date of deposit to Treasury. The date of
deposit to Treasury is still the taxpayer-initiated settlement date
- Effective EFTPS deposits through a Customer Delivery System.
Taxpayers using their financial institution's Customer Delivery System
can create problems for themselves and their financial institution. Be
aware that some Customer Delivery Systems:
1) Permit taxpayers to initiate a Fedwire (Typecode 1000) when a Non-Value
Fedwire (Typecode 1090) is preferable if the depositary is a note option
2) Permit taxpayers to initiate a same-day tax deposit after the cut-off time.
3) Use an incorrect settlement date which may cause customer service
problems for the financial institution or depositary.
- EFTPS Help-Lines for Financial Institutions
BankOne (was First Chicago): 1-800-945-7900
Bank of America (was NationsBank): 1-800-605-9876
- EFTPS Customer Service Lines for Taxpayers
English Spanish 1-800-945-8600
Bank of America:
- EFTPS Tax Payment Reporting (for Customers to initiate ACH Debits)
Bank of America:
In Mid-2000, the Federal Reserve System and Treasury will unveil the Treasury Investment
Program (TIP). TIP will revamp the Treasury investment program and the Government's
collateral management programs. TIP offers:
- New Investment Program option
- Enhanced investment and withdrawal options
- Improved account management tools
With the implementation of TIP, Treasury will terminate the payment of fees for FTD
processing. The tremendous success of EFTPS has reduced the need for compensating
depositaries to the point that the average depositary now receives compensation of less than $2
per business day. Treasury expects continued expansion of EFTPS will reduce the average
compensation even further by mid-2000.
The FRB will be holding seminars on TIP sometime in the future. Please take advantage of these
seminars and the promotional literature that your FRB will be distributing in the coming months.
Department of the Treasury
Any questions about EFTPS, please call EFTPS Customer Service at 1-800-555-4477 or 1-800-945-8400 24 hours a day, 7 days a week.