May 6, 1997

Congress Should Waive Penalities for Businesses that Err with Electronic Tax Filing, Urges the National Association for the Self-Employed

Washington, D.C. -- The National Association for the Self-Employed (NASE) has urged members of Congress to support an immediate abatement of penalties for businesses that make mistakes when using the new, required Electronic Federal Tax Payment System (EFTPS).

This step is provided for in the Senate's supplemental FY '97 appropriations bill, through an amendment offered by Senate Small Business Committee Chairman Kit Bond (R-MO), and called for by 18 members of the Senate Finance Committee . Unless current law is changed, all businesses with over $50,000 in payroll taxes must begin using the system by July 1, 1997; the deadline to register for EFTPS was May 1, 1997. Over the long run, the NASE urged lawmakers to make the system voluntary for small businesses, as proposed in legislation (S. 570 and H.R. 722) introducted by Sen. Don Nickles (R-OK) and Rep. Doc Hastings (R-WA).

In a letter to Congress, NASE President Bennie L. Thayer outlined various reasons small businesses are reluctant to join the EFTPS:

• EFPTS would not provide the security of a paper receipt for their transaction, pitting the word of the IRS against the individual if a mistake is made;
• The IRS is requiring small businesses to use an extremely unfamiliar system, which for some will be their first attempt at electronic commerce;
• The IRS has a long history with computer problems, leaving many fearful that the same will happen again;
• The EFTPS structure favors two banks -- NationsBank and First National Bank of Chicago -- which may lead electronic filers to use these corporations for all their banking needs, leaving smaller, community banks out in the cold.

"There is no doubt that many small businesses will welcome EFTPS," Thayer concluded. "But that's no reason to mandate the system for all small businesses. Don't add another government mandate to an already difficult environment. Congress should act now to abate these penalties, and work toward making the system permanently voluntary for small businesses."

# # #

Go to News page.