Why was EFTPS mandated?
In order to offset decreased revenues resulting from the North American Free Trade Act (NAFTA), Congress mandated the electronic collection of federal depository taxes. Prior to 1995, all taxpayers were required to deposit these taxes – federal insurance (FICA), federal unemployment (FUTA), withheld income, railroad retirement, corporate income, and various federal excise taxes – with an authorized depository institution or Federal Reserve Bank on tax due date. This could be accomplished by using federal tax deposit paper coupons or magnetic media. The depository institution was then given one banking day to transfer the funds to the Treasury’s account. The electronic mandate now requires that those funds be applied to the Treasury account on tax due date, thereby accelerating the government’s use of the funds by one day.
