Employers required to make deposits via the Electronic Federal Tax Payment System should use a work-around any time they’re taking a COBRA subsidy payment credit – otherwise the system may reject the deposit.
Here’s why: When Payroll reduces a federal tax deposit because of a COBRA subsidy payment, there’s no place to enter the amount of the credit. So, for example, let’s say your company’s making a $5,000 FIT and $5,000 Social Security tax deposit, but you have a $1,000 COBRA subsidy payment credit. You would normally enter each $5,000 deposit in its own subcategory and enter $9,000 as a total ($5,000 FIT + $5,000 SS = $10,000 – $1,000 COBRA credit = $9,000). But the system won’t accept the deposits because the amounts shown in the subcategories are out of balance with the total.
The easy fix? Omit the subcategory data (i.e., the breakdown of each deposit amount). EFTPS doesn’t require this info, and without the data the transaction will process normally. That’s according to an IRS representative speaking during a recent payroll industry partner conference call.
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