The Treasury Department has been pilot testing a free interface between its Electronic Federal Tax Payment System and Intuit's QuickBooks software and plans to expand the interface to other software.

So far, the program has just been used to automate tax payments with the QuickBooks Payroll software. But the director of the tax collection division at the Treasury's Financial Management Service, Mark Stevens, hopes to provide interfaces first to financial institutions with their online banking services, and eventually to other third-party software developers.

The Treasury Department has been successfully transitioning its old dial-up EFTPS software to a batch provider version in the past two years while convincing more taxpayers and businesses to make the change (see Treasury Upgrades Electronic Payments). The free service allows them to pay all their federal taxes - including income, employment, estimated and excise taxes - by phone, over the Web or through special software. The enhanced batch provider software allows tax professionals to transmit up to 1,000 enrollments and 5,000 payments at a time.

FMS has been working on the pilot project with Intuit since July 2007. "We're exposing some of our EFTPS Web services to QuickBooks payroll software to allow them to have a direct interface," said Stevens. Between last July and the end of the year, the system processed 124,000 payments totaling $375 million. Users need to be enrolled in EFTPS to use the system. They sign in through their taxpayer IDs, and go through QuickBooks to access EFTPS.

Now Stevens is doing outreach to financial institutions to build a software, Web or retail-banking interface to EFTPS. That would allow taxpayers to make estimated tax payments directly through the service via their online banking software.

"Part of our excitement around this is that through market research, we understand that banks and other financial institutions have relationships with small businesses and individuals who are already comfortable paying their bills online," said Stevens.  "We would leverage a trusted relationship that's already out there with taxpayers."

Users would be able to pay business or individual taxes, payroll taxes and estimated quarterly taxes on self-employment income. Stevens is looking at doing some direct outreach through Webcasts to gauge interest in the service. "We really see a huge opportunity," he said.

He plans to expand the service to other tax payments through QuickBooks in addition to payroll taxes. He also would like to open up the program to other third parties. "We want to make sure we bring in large partners as well as small partners," he said.

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