Steps to Add a Payee
Electronic Federal Tax Payment System (EFTPS) is sanctioned by the IRS as a change in its collection system for Federal tax payments. EFTPS is not a direct deposit and only allows payment from one checking account per enrollment.
There are two payments methods for EFTPS: 1) EFTPS-Direct and 2) EFTPS-Through a Financial Institution. The EFTPS-Direct method allows you to make a payment directly through EFTPS based on your instructions to initiate a debit transaction against your bank account. If you are enrolled for the EFTPS-Direct method, you have the option to make your tax payments after each payroll using the Internet (EFTPS-Online) or the phone using the Voice Response System (EFTPS-Phone).
The second method, EFTPS-Through a Financial Institution, allows you to deliver your tax payments electronically to EFTPS by using a service offered by your financial institution. Your financial institution sends a credit transaction to the Treasury’s General Account on the date you indicate. In order to use the EFTPS-Through a Financial Institution method, your financial institution must offer an ACH Credit organization service and you must be eligible to use it. If you are enrolled for the EFTPS-Through a Financial Institution method, you must contact your bank after each payroll with the payment transfer amount and the bank transmits the payment to the IRS.
There are three options to record the EFTPS payment on the School Accounting System. Each option is described below.
Note: If you change which option you use to record the EFTPS payment on the School Accounting System in the middle of a quarter (specifically if you change from Option 2 to another option in the middle of the quarter), you will need to manually calculate the amount to enter in Box 11 of the 941 and edit that box as needed.
Option 1--Use a Payee Check:
Since EFTPS only allows payment from one checking account per enrollment, those school districts that are using multiple checking accounts for payroll and have only one EFTPS enrollment with the IRS must use this method and print payee checks from each checking account. All checks will be made payable to the school district and will be deposited to the school’s General Fund checking account.
Add a payee for the school district in the Payee File.
Enter the ID for the new payee in the Payee field in the Taxes File for the following taxes: Federal Income Tax, Medicare, and Social Security.
During the payroll calculation and check cycle, a check will be written from each checking account to the school district for the appropriate amounts for the Federal taxes.
Deposit the checks into the General Fund checking account to offset the EFTPS transfer. Do not enter these checks as cash receipts in the computer.
Option 2--Manual Journal Entries:
With this method, manual journal entries are made to record the EFTPS payment. This method provides an entry to record the reference number received from the IRS for the payment transaction as an audit trail.
The Payee field in the Taxes File should be blank for the following taxes: Federal Income Tax, Medicare, and Social Security.
During the payroll calculation and check cycle, the amount calculated for Federal taxes will remain in the specified payable accounts.
Enter a manual journal entry after calling the IRS or bank to make the transfer. The manual journal entry should credit the Cash in Bank account and debit the Federal taxes payable accounts for their share of the total payment.
Tip:
Refer to the Federal tax amounts under the Adjustment column on the Payroll Register Totals or Payroll Register Totals-Combined report. Be sure to compare these figures with the amounts in the appropriate payable accounts on the Balance Sheet.
Option 3--Automatic System Entries in General Ledger:
With this method, the system makes automatic entries to credit the cash account and debit the payable accounts for the correct amounts.
Add a payee called EFTPS Journal Transfer in the Payee File. Select the Direct Deposit field for the new payee, but leave the remaining Direct Deposit Information fields blank.
Enter the ID for the new payee in the Payee field in the Taxes File for the following taxes: Federal Income Tax, Medicare, and Social Security.
During the payroll calculation and check cycle, a direct deposit stub will print for the appropriate amount for the Federal taxes. This amount will not be included in the direct deposit automatic transfer file if your district has employees or other payees who are set up for direct deposit.