What is the "New" Postmark?

[Corduroy Frog]

It used to be simple. IRS would note the postmark, and honor the date as being filed/paid by the taxpayer. If tax return took 30 days to get there, the postmark would still be honored.

My hypothetical client filed electronically on Apr 12th, with this years' deadline of Apr 18th. He spent a couple days getting money together, then managed to launch an electronic payment from his personal bank on Apr 18th.

IRS is now billing for penalties on late payment. Payment launched on Apr 18, IRS received payment on Apr 22, and the payment "cleared" the bank on April 28th. I don't understand how there can be several days' delay if the payment is electronic and several days' to "clear."

This may be more in the banking area than a tax practitioners' area. Is it possible that the bank has an arrangement with a clearing bank for electronic commerce? And the arrangement does not charge a transaction fee, but the clearing bank is allowed to "sit" on the money for 48 hours and hold the money? (Incidentally, given enough subscriber banks, the clearing bank could have a balance of millions of dollars on any given day).

If such an arrangement is in place, when does the IRS actually give the taxpayer credit for having paid his taxes??

[S T]

Could it be

Might it be that your client made an online (electronic) payment from his bank - filling out all of the information for a check to be mailed to the IRS - with all of the appropriate information. There is always a timing delay for Banking Online Payments - Usually several days - The Banks will use a "deliver date"

Even if the client went online to EFTPS (if registered) my experience has been the payment will not be posted the same day - usually a day or two delay.

Sandy

[erchess]

My impression

is that the IRS considers the payment made on the date that they are given permission to take the money. I know in my software I can set up a direct debit from any account the client has and I think the IRS accepts the payment as made on the date they may take it even if for some reason they don't take it until later. Of course that assumes funds are available when they get around to tapping the account.

As for your situation where the client went through the bank I don't know the rules but I bet the PPL could enlighten you on Monday.

[FEDUKE404]

Payment or debit?

Although I see your point, my first guess is that perhaps the IRS sees things differently for something being "filed" as with a paper/online return versus when payment was "received" as with a paper check/electronic payment.

Others probably know far more about this aspect....I think I filed only a couple of paper returns this past season.

For my own clients, using a CYA consideration, I scheduled no payments (debits using RTN/DAN) post April 11th if at all possible. This includes clients who filed in late Feb/March/etc. and selected a future debit date.

But something here is just not passing the smell test.........

From personal experience, and talking to some of my clients, an electronic transfer WILL generally take place on the actual date requested in virtually all cases. I deal primarily with IRS/NC debits. (I do know VA is notorious for "adding a couple of days" to the process, but they specifically state your payment will be deemed paid when payment was initiated/requested.)

There is no way on earth an electronic debit can take 10 days to process!! Did the bank perhaps generate/snail mail a paper check or something (don't think you can even do that?) such as with online billpay as opposed to a true "debit" BY the IRS? Were there sufficient funds in the bank on the "original" payment date?

Keep us posted on this one!

FE

[taxmom34]

when i make an electronic payment from my bank debit, my screen shows if payment requested on april 18 , delivered on april 22. he has a penalty. if he wanted it to be made on april 18 he had to make the payment on april 12.
it would have been different if he had when he efiled his return done the debit and let IRS take the money there would not have been a penalty, because he authorized the IRS to take it on the 12 or 18 (whichever date he designated)

[appelman]

Taxmom has it right!

If he didn't schedule an ACH payment when he e-filed, he would be well-advised to mail a check. No penalty if postmarked on the 18th.

[FEDUKE404]

If anyone knows....

While I have never done (and never would!) such, does anyone know how/if the IRS even processes a "bank check," such as would arrive if the client used his bank's online bill pay, that arrives without any Form 1040-V?

I would think such an approach might carry substantial risks.....

ALSO: IIRC the IRS has a separate snail mail address for processing payments only???

From personal experience, I know my own bank's online billpay has several built in delays. For payments to, let's say the local utility, such payments are obviously made electronically and can be reliably scheduled/made for, in most instances, a 24-hour window. However, for payments where a paper check must be generated/mailed, such as a birthday gift to someone, the bank itself inserts a minimum 5-day delay from when a request is made, and then you still have to endure the trials and tribulations of the USPS which might add even further delay.

And as taxmom34 mentioned, the safest/logical/most practical approach would have been to authorize an IRS debit at the time of efiling. As I mentioned earlier, my experience has been the debit occurs, without problem, on the actual date requested. I always tell my clients to be SURE they have the money in the bank for a chosen debit date and likewise for the four (automatic) estimated tax payment dates if they selected that payment option at the time of efiling.

I fear the client mentioned has likely filed the tax return on time but the payment for the balance due was, indeed, "late" since it appears a paper check was sent and the request for such did not even start until April 18th. "Plan B" likely would have worked if a personal check, along with the Form 1040-V, had been dropped in the snail mail NLT April 18th.

FE

[PIGLEE]

Once I made a EFTPS payment on the day it was due. It was late, later I saw a message on the web site that said it needed 1 or 2 days (can't remember which) to process the payment.

[S T]

Stated better

TaxMom stated it better than I did

Online Banking is not same day "electronic" usually - some exceptions, for some Vendors that the Taxpayer's Bank regularly processes payments.

EFTPS - if registered to use this site, is usually delayed 1-2 days

FEDuke had a point, in that how could t/p make online payment to IRS without a 1040-V voucher ?

Not sure if Banks are set up yet to do same day transfer to IRS or a State Agency through the Taxpayer's bank - I have always had to sign up with the EFTPS system or State System first to be recognized.

I have only inititated actual Debits through Electronic Filing a time or two for my clients - but FE Duke states he has experienced not any or hardly any issues.

I use State and Federal debits for payroll all the time, and I have to say, I have only experienced one or two issues - so for the most part that works for payroll.

Maybe Snags, will have to post more on his "hypothethical" client and payment to see what might have actually transpired, at the actual inititation of the T/P payment at his bank

Sandy

[JG EA]

Just for clarity. If the payment is MAILED it can be postmarked on the due date and not be late.