TO: DISTRIBUTION LIST
FROM: Clare
Calaby
Director, Governmental Liaison
Terence H. Lutes
Director,
Electronic Tax Administration
SUBJECT: Employment Tax E-File System
This information package notifies Government Liaisons, and the State tax officials with whom they consult, of new opportunities available for federal/state employment tax
e-filing. Recent developments in federal /state employment tax present State governments with new technology considerations and ongoing partnership opportunities. We encourage state governments to become involved by reviewing this package and attending the Federation of Tax Administrators (FTA) e-file symposium scheduled for April 2003.
The IRS has partnered with other federal agencies and state governments to create a set of XML standard record layouts that will satisfy an employer’s federal and state tax and wage reporting obligations. IRS encourages federal and state agencies to select and implement compatible e-filing technology, which will allow State governments to use these transmission and data format standards. State data formats have been structured by participating states to support either separate or combined e-file of state Withholding and Unemployment Insurance taxes.
The release of the new Employment Tax e-file System on January 6, 2003, is the first step in modernizing IRS e-file programs. For the first time the IRS will accept e-file returns using XML technology. With a more robust acknowledgement process and faster turnaround times, the new Employment Tax e-file System will offer more features and greater flexibility for filing employment tax returns. The new system will effect a new way to file for current 940 and 941 e-file and On-Line filing partners, and for the first time, Electronic Return Originators (EROs) will have the ability to offer employment tax filing for their clients. In order to allow for transition to the new XML based system, previous e-file formats will be maintained for the immediate future. The XML e-file formats will eventually replace current magnetic tape reporting and legacy systems.
To provide additional information and answer your questions about IRS Employment Tax e-filing implementation, and federal/state XML standard record layouts, the IRS will partner with Tax Implementation Group for EC Requirements Standardization (TIGERS) to present a half-day session at the 2003 Annual FTA e-file Symposium. This symposium will be held April (dates), 2003 in (location).
See also the Employment Tax e-filing fact sheet and the Fed/State Employment Tax User’s Guide. Access www.taxadmin.org, and www.irs.gov for updated information about program implementation and copies of the Employment Tax e-filing schemas.
Contact Tracy Green-Caster (202) 283-0418 (Tracy.Green-Caster@irs.gov) or Cynthia Dessel at (202) 283-7063 concerning this information package and the new IRS Employment Tax e-file System.
Attachments
As Stated
Distribution List:
(GLs)
The New Federal/State Employment Tax System Fact Sheet
Employment Tax E-File System Features
The new IRS Employment Tax e-file System will accept filings of the following Forms and Schedules:
Ø Form 941, Employer’s Quarterly Federal Tax Return
Ø Form 941 PR, Planilla Para La DeclaracionTrimestral Del Patrono-La Contribucion Federal Al Seguro Social Y Al Seguro Medicare
Ø Form 941SS, Employer’s Quarterly Federal Tax Return
Ø Form 941c, Supporting Statement to Correct Information
Ø Form 941cPR, Planilla Para La Correccion de Informacion Facilitada Anteriormente en Cumplimiento con La Ley Del Seguro Social Y Del Seguro Medicare
Ø Schedule B, Employer’s Record of Federal Tax Liability
Ø Anexo B, Registro Suplementario De La Obligacion Contributiva Federal Del Patrono
Ø Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
Ø Form 940PR, Planilla Para La Declaricion Annual Del Patrono – La Contribucion Federal Para El Desmpleo (FUTA)
Ø State Withholding and Unemployment Insurance taxes for participating states, either as separate or combined filing
More Explicit Error Conditions – New error conditions pinpoint the location of the error in the transmission, and provide complete information for each error identified.
Faster Acknowledgements – Trasmissions are processed on receipt. Our Trading Partners will not have to wait for system “DRAINS”. Acknowledgements returned in near real-time.
Integrated Payment Option – Eligible filers may submit a required payment along with their return, subject to limitations imposed by the Federal Tax Deposit Rules.
Completely Electronic Signature Process – Taxpayers and Reporting Agents will continue to sign their returns with their own IRS issued Personal Identification Number (PIN).
State E-file May Be Included – State Withholding and Unemployment Insurance filings may be sent directly to state gateways by XML standards-based e-file software, providing “one-stop” filing for the taxpayer.
Electronic Return Originators (EROs) – Originators of electronic tax return submissions. EROs are approved to file by submitting Form 8633 to the Andover Submission Processing Center.
Third Party Transmitters – A firm, organization, or individual that receives electronic return date from taxpayers, EROs and Reporting Agents. The transmitter may reformat the data (if necessary), batch them with returns from other filers, and transmit the data to the IRS.
Reporting Agents – An accounting service, franchiser, bank or other person that complies with Rev. Proc.96-17, as modified by Section 21.02 of Rev. Proc. 99-39, and is authorized to prepare and electronically file Forms 940 and 941 for the taxpayer. Reporting Agents sign all of the electronic returns they file with a single PIN signature.
Software Developers – Develop software for their own use, or commercial sale for the purpose of electronically filing employment tax returns. All software must pass an Assurance Testing process prior to being approved for e-filing.
Taxpayers – Prepare and file their own returns using commercially available e-file software, or through a Third Party Transmitter. Taxpayers register for and receive a PIN by submitting an electronic PIN Registration through a Third Party Transmitter.
States can gain the benefits of e-file for state employment taxes with established multi-state FSET XML standards for Withholding and Unemployment Insurance data.
Ø Provides a single standard for federal and state software developers.
Ø Increases potential viability of electronic systems implemented within limited state resources.
Ø Enhances federal and state partnership and data exchanges.
Ø Promotes elimination of intensive magnetic media processes.
Ø After implementation, e-filing is less expensive to administer than magnetic and paper processes.