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Should You Be Paying Your Taxes Electronically?

The economic downturn has hurt state governments as much as taxpayers. With states in need of money, it’s no surprise that the number of states requiring electronic payment of taxes for both businesses and individuals is on the rise. Electronic payment is an easy way for states to quickly get much needed funds as well as generate additional revenue by assessing penalties for those who do not comply. Electronic payment requirements apply to individuals and/or businesses. Many states do not make an effort to make taxpayers aware of their electronic payment requirements.

While Illinois has a relatively high threshold, requiring those with annual tax liabilities exceeding $200,000 to pay electronically, other states require considerably smaller payments to be remitted electronically. For example, in Alabama, a single payment of $750 or more must be electronically remitted.

Some states require that taxpayers be notified of electronic payment requirements. However, other states such as Massachusetts, do not send out notices to taxpayers regarding electronic filing and expect all payments, including estimates and extensions, to be remitted electronically. In essence, taxpayers in Massachusetts are expected to know the electronic payment requirements even without notification of electronic payment requirements from the government.

Penalties for noncompliance can be substantial. Connecticut assesses a penalty of $5,000 for failure to comply with its electronic payment rules. A $1,000 penalty is assessed for each additional infraction.

With constant changes being made at the state level and the need for additional funds, state taxation has become very complex. There should be no reason for a taxpayer to pay penalties and interest due to not remitting tax payments electronically. It’s important to consult a tax professional to make sure that you are meeting all the requirements in the states in which you do business and thereby avoid costly penalties.

We recommend that those filing state tax returns in multiple states or having large state tax liabilities consult a tax professional to determine if they have electronic payment obligations. Blackman Kallick’s state and local tax (SALT) group has the insight and experience to properly advise taxpayers on their responsibilities.

For more information or to discuss any concerns regarding electronic payment, please call Deb Rood at 312-980-2995, Jason Parish at 312-980-2959 or your Blackman Kallick representative.

 

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.