Business taxpayers in Illinois will be the first in the country able to pay state withholding and federal taxes at the same time, through a single system.

The Treasury Department’s Financial Management Service and the Illinois Department of Revenue announced the pilot program this week.

While the Electronic Federal Tax Payment System has been available for all federal tax payments for more than 10 years, the Illinois pilot marks the first time state withholding taxes also may be paid via the system.

The pilot’s goal is to encourage even more taxpayers to enroll in the system -- which is allows the Treasury to collect federal receipts timely, at the lowest cost and through an all-electronic process. EFTPS offers a variety of payment methods, including the Internet, a telephone voice response system and desktop software.

In a statement, Brady Bennett, the deputy commissioner of the Internal Revenue Service’s Small Business and Self-Employed Division, said that the pilot is an important step in streamlining the process for all small businesses.

Most small businesses continue to pay federal withholding taxes by check and Federal Tax Deposit coupons, as opposed to the EFTPS. The state of Illinois ranks fifth in the nation in FTD coupon usage, with more than 1.6 million coupons processed for the 2005 calendar year.

The pilot will help Illinois officials examine whether making EFTPS available for state taxpayers will improve the efficiency of the state’s own tax collection system. Results of the pilot will also be used to help the Treasury determine whether to expand the service to other states.

The Illinois State Chamber of Commerce has been a vocal public supporter of the pilot.

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