With House Bill 334, the Georgia Department of Revenue has changed Regulation: 560-3-2-.26 “Electronic Funds Transfer, Credit Card Payments, and Electronic Filing” that will have a dramatic effect on virtually all small businesses operating in Georgia.
The new rule lowers the threshold at which businesses must submit tax payments electronically. That threshold was $10,000 for all tax payments made prior to January 1, 2007. It has been $5,000 for all tax payments made after January 1, 2007; but, it gets progressively lower 2010 and 2011.“Effective for tax periods beginning on or after January 1, 2010, the threshold will decrease to $1,000. Therefore, any person or business with any single sales and use tax or withholding tax payment that is greater than $1,000 will need to both file electronically and remit their payment by EFT as well as for all future payments and filings.”
The threshold goes down to $500, beginning with payments due January 2011 or later.
What does this mean? It means that, going forward, business taxpayers will have to begin making electronic payments for Sales and Use Tax and Withholding Tax, if any of their tax payments are greater than $1,000 (beginning January 2010) or $500 (beginning January 2011). And, once you cross that threshold, you have to make ALL subsequent payments electronically, even if subsequent payments drop below the threshold.
This eliminates the notorious “float” of several weeks that it normally took the GA DOR to process checks. It eliminates filing early, but sending payments later. It gives the department access to your bank account.
What should you do to protect yourself as a small business person? I would recommend that you work with a tax preparer, who can offer filing services, and who can warehouse your payment until the very last possible day to process it, in order to avoid late payment penalties and interest. Remember, that in Georgia, you have until the 20th of the month to file the previous month’s Sales and Use tax return – but only until 3 PM on the 19th of the month to pay the amount due.
I’m a sales tax guy (my website is here), so I think in terms of Sales and Use tax, primarily, but the other tax types are in play as well. If the 20th falls on a weekend or holiday, you really only have until 3 PM on the Friday BEFORE the 20th to make your payment.
Most other states (and I file sales and use tax returns in 44 of them) allow the due date to slip back to the Monday or Tuesday AFTER the due date, if the due date falls on a weekend of holiday. Even those states whose due dates fall on the last day of the month allow the due date to slip to the Monday or Tuesday afterwards in this case. (I’m unsure why Georgia is the only state with this rule in place. But that’s a different article altogether.)
So, what happens if you fail to comply? The penalty is also spelled out in the new law:“Each failure to remit payment by EFT will result in the assessment of a 10% penalty of the payment due. An additional penalty equal to the greater of $25.00 or 5% of the entire tax due (before payments and credits) will be assessed for each return not submitted electronically.”
I’ll give credit to the policy makers at the Georgia Department of Revenue, though. They have finally carried through on a pledge that the State Revenue Commissioner made when he was appointed in 2003, to require as many taxpayers as possible to file and pay electronically.