IRS MODIFIES ELECTRONIC DEPOSIT REVENUE PROCEDURE.

Rev. Proc. 94-48A

SECTION 1. PURPOSE

This revenue procedure clarifies, modifies, and amplifies Rev. Proc. 94-48, 1994-29 I.R.B. 31 (July 18, 1994). Rev. Proc. 94-48 informs taxpayers and financial institutions who participate in TAXLINK of their obligations to each other and to the Internal Revenue Service. TAXLINK is an electronic remittance processing system that the Service uses to accept an electronically transmitted federal tax deposit (FTD).

SECTION 2. SUMMARY OF CHANGES

.01 Section 3 is modified and amplified to indicate the changes made to other sections.

.02 Section 6 is amplified to define Federal Reserve Bank Head Office Local Zone Time in section 6.10, and Prenotification in section 6.17.

.03 Section 9.03 is modified to allow a taxpayer who makes deposits in connection with Form CT-1 and chooses the ACH credit payment option to use a Financial Agent other than Mercantile Bank of St. Louis.

.04 Section 13 is modified to: (1) eliminate, under certain circumstances, the requirement to ask the Service for permission to use Fedwire; (2) extend, in some cases, the 2:00pm eastern time deadline for making a Fedwire payment; and (3) provide an example of when to initiate payment of a federal tax deposit through Fedwire when an employer's payroll date is not a banking date.

.05 Section 16.01 is clarified to indicate that "return" applies to an ACH debit transaction.

SECTION 3. CHANGES TO REV. PROC. 94-48

.01 Changes to Section 3.

(1) Section 3 is modified by deleting sections 3.08 and 3.09, and amplified as follows:

.08 Definitions of Federal Reserve Bank Head Office Local Zone Time and Prenotification have been added. See sections 6.10 and 6.17.

.09 Fedwire is available to all participants as a back-up payment method. Only a taxpayer required to make an FTD using EFT may choose to use Fedwire as a routine payment option. A taxpayer must indicate this choice on its application. See section 13.

.10 For those taxpayers who make Form CT-1 deposits, information concerning the choice of payment option and financial agent is provided. See sections 9.03 and 9.04.

.11 The discussion concerning when a Financial Agent can "return" a payment is clarified to refer to an ACH debit transaction. See section 16.01.

(2) Section 3.10 is renumbered section 3.12.

.02 Changes to section 4. Section 4.03 is modified to renumber the reference to old section 6.11 to new section 6.12.

.03 Changes to Section 6.

(1) Section 6, which defines Automated Clearing House (ACH), is modified by deleting section 6.03, and amplified as follows:

.03 AUTOMATED CLEARING HOUSE (ACH). "Automated Clearing House" is a central clearing house facility where EFT instructions are exchanged between financial institutions.

.10 FEDERAL RESERVE BANK HEAD OFFICE LOCAL ZONE TIME. "Federal Reserve Bank Head Office Local Zone Time" is the local zone time of the Federal Reserve Bank head office through which a depository financial institution, or its correspondent, originates a Fedwire tax deposit to the Federal Reserve Bank of Minneapolis. If the depository financial institution that originates the taxpayer's Fedwire tax deposit is located in Federal Reserve Districts one through six, the Federal Reserve Bank Head Office Local Zone Time is eastern time. If the depository financial institution that originates the taxpayer's Fedwire tax deposit is located in Federal Reserve Districts seven through eleven, the Federal Reserve Bank Head Office Local Zone Time is central time. If the depository financial institution that originates the taxpayer's Fedwire tax deposit is located in Federal Reserve District twelve, the Federal Reserve Bank Head Office Local Zone Time is pacific time. (Note: there is no Local Federal Reserve Head Office that uses mountain time.)

.17 PRENOTIFICATION. "Prenotification" is a process whereby a taxpayer's financial institution notifies the Financial Agent that the financial institution intends to send the Financial Agent a particular taxpayer's FTD(s) through TAXLINK using the ACH credit transaction payment option. As part of the prenotification process, the financial institution must send to the Financial Agent certain information in a properly formatted addenda record(s) that identifies the taxpayer and the tax(es) to be paid. The prenotification process is described in sections 11.06 through 11.08.

(2) Section 6, as amplified, is renumbered as follows:

(a) old sections 6.10 through 6.15 are renumbered as new sections 6.11 through 6.16; and

(b) old sections 6.16 and 6.17 are renumbered as new sections 6.18 and 6.19.

.04 Changes to Section 9. Section 9 which assigns taxpayers to Financial Agents, is modified by deleting section 9.03, and amplified as follows:

.03 Filers of Form CT-1 may choose to use either the ACH credit or the ACH debit options. Taxpayers who file Form CT-1 and choose to use the ACH debit payment option must enroll with and use the services of the Mercantile Bank of St. Louis. These taxpayers may also use the Mercantile Bank of St. Louis for their other TAXLINK deposits provided they use the ACH debit option to make the deposits. Taxpayers who choose to use the ACH credit payment option must make Form CT-1 deposits through FNBM, but must first call the TAXLINK Helpline at (800) 829-5469 for instructions because Form CT-1 is not listed on the TAXLINK enrollment form.

.04 Taxpayers who make deposits in connection with Form CT-1 through the Federal Reserve Bank of New York as required by Rev. Proc. 83-90, 1983-2 C.B. 615, may continue to use that method of payment.

.05 Changes to Section 13. Section 13, which provides for the use of Fedwire, is modified by deleting sections 13.02 and 13.03, and amplified as follows:

.02 Fedwire is not a routine payment option for taxpayers who voluntarily participate in TAXLINK, but may be used as a back-up payment method. Taxpayers who are required to make FTDs by EFT, however, may use Fedwire as a routine payment option, and must use it as a back-up payment method.

.03 The first time a taxpayer who volunteers to use TAXLINK needs to use Fedwire to make an FTD, the taxpayer must call the toll- free TAXLINK HELPLINE at (800) 829-5469 to enroll with Fedwire. If the enrollment is completed, the Service will provide the necessary instructions. These instructions describe the payment information a taxpayer must include in the Fedwire and the manner in which the taxpayer's financial institution should initiate the Fedwire. If the TAXLINK HELPLINE number is busy, a taxpayer may call the TAXLINK Operation's Unit at (404) 455-2389 (nota toll-free number). A taxpayer should only use this number under the following circumstances: (a) the TAXLINK HELPLINE number is busy; and (b) the taxpayer needs authorization and instructions to make a Fedwire payment.

.04 After the initial enrollment to use Fedwire is completed, a taxpayer who volunteers to use TAXLINK does not need to call the TAXLINK HELPLINE to use Fedwire when the taxpayer is unable to make a timely FTD using an ACH credit transaction or a debit transaction.

.05 A taxpayer who is required by section 6302(h) to make FTDs by EFT must use Fedwire as a back-up payment method. After the TAXLINK enrollment process is completed, the Service will send a taxpayer instructions regarding the use of Fedwire. A taxpayer who receives these instructions does not need to notify the Service before it makes a Fedwire payment.

.06 A taxpayer who is required by section 6302(h) to make FTDs by EFT must indicate on its application if it chooses to use Fedwire as a routine payment option. After the TAXLINK enrollment process is completed, the Service will send a taxpayer instructions regarding the use of Fedwire. A taxpayer who receives these instructions does not need to notify the Service before it makes a Fedwire payment.

.07 The Service will generally deem an FTD to have been made on the date a Fedwire payment is received by the Federal Reserve Bank of Minneapolis, provided the Fedwire payment is received by that bank no later than 2:00pm Federal Reserve Bank Head Office Local Zone Time of the financial institution that originates the Fedwire payment of the FTD.

.08 The following example demonstrates the use of Fedwire when an employer's payroll date is not a banking date. Taxpayer is required to make FTDs by EFT beginning January 1, 1995. Taxpayer's payroll date falls on a Saturday, January 7, 1995. The payroll taxes for that Saturday are in excess of $100,000. Thus, the taxpayer is required to deposit its payroll taxes on the first banking day after Saturday, which is Monday, January 9, 1995. On Friday, January 6, 1995, the taxpayer was unable to reasonably estimate its payroll tax liability and, therefore, was unable to initiate an ACH payment. In order to meet its obligation to deposit by EFT, taxpayer must use Fedwire on the following Monday, January 9, 1995. However, the Federal Reserve Bank of Minneapolis must receive the Fedwire payment no later than that Monday by 2:00pm Federal Reserve Bank Head Office Local Zone Time for the depository financial institution or its correspondent that originates the Fedwire payment of the taxpayer's FTD.

.06 Changes to Section 16. Section 16, which provides for returns and reversals, is clarified by revising section 16.01 as follows:

.01 A Financial Institution can return an ACH debit transaction in an "insufficient funds situation." An insufficient funds situation exists when:

(1) there are insufficient funds in the taxpayer's account to fund the FTD;

(2) the taxpayer's account is closed or frozen; or

(3) the FTD has been stopped.

SECTION 4. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 94-48 is clarified, modified, and amplified. The changes set forth in this revenue procedure will be reflected in Rev. Proc. 94-48 when it appears in the Cumulative Bulletin.

SECTION 5. ENROLLMENT AND ADDITIONAL INFORMATION ABOUT TAXLINK

.01 Taxpayers may obtain enrollment forms and additional information about TAXLINK from:

          Internal Revenue Service

.02 Financial institutions that would like additional information about TAXLINK may write to:

          Electronic Tax Collection Team

SECTION 6. EFFECTIVE DATE

This revenue procedure is effective December 15, 1994.