Maine Taxes Must be Paid Electronically by Many Individuals

(And Must Register Within 30 Days of Receiving a Notice from Maine Revenue Services!)

Stan Rose, Managing Director, Tax Practice
December 2014

This article will be delivered to you electronically, and most of you are reading an electronic version of it, rather than a printout.  As I type this, I’m staring into the middle of three monitors, and am able to type only because my phones (for the moment) are dormant.  Most tax returns are now filed electronically, and most mail now consists of e-mail (relegating conventional mail to be snidely referred to as “snail-mail”).  The pervasiveness of electronics sort of sneaked up on us, and I’m not sure where it ends.  (I’ll venture a guess, though, that before I retire some of my clients or colleagues will visit me via hologram.  Perhaps they will even visit me at home on a stray day off, even following me to my workshop or basement.  If so, please excuse the mess!)  But forgive my e-rant, and my e-rabbit trail.  The purpose of this article is to explain a requirement that recently has impacted more of our clients: The need to send tax payments to Maine Revenue Services electronically, rather than by check.

Many of our clients recently received notices from Maine Revenue Services (“MRS”) informing them that they are now required to remit all future payments due to MRS electronically.  A redacted copy of one of those notices can be found here.  Plenty of recipients are unhappy to receive these notices, and have inquired whether they have to comply and whether the notices means what they appear to mean.  Here, in Q&A form, is some information related to these notices and the underlying rules.

Do I really have to make payments electronically, or is it just another option, and I can continue to pay by check?  Answer:  Based on the rules, if you received a notice from MRS like the one linked to above, you should begin paying electronically soon, and can no longer use checks.  Many practitioners would be quick to point out that these requirements consist of administrative rules written by MRS, rather than the state legislature, and MRS does not appear to have been enforcing these rules.  We speculate that MRS now is prepared to do so, and recipients of the recent notices should take action.

Can I obtain a waiver from the electronic payment requirements?  Answer:  MRS offers a waiver application that can be printed from their website, and for a number of enumerated reasons as well as case-by-case requests by taxpayers who would like to be excluded for “reasonable cause,” MRS may grant waivers.  If they do, that taxpayer can continue to make payments by check.  A possible example of reasonable cause could involve someone who is not comfortable with electronic banking of any kind.  In our experience, MRS is very accommodating of taxpayers who request waivers.

What happens if I ignore this requirement?  Answer:  The rules indicate that a second infraction may result in a penalty of 5% of the tax due or $5,000, whichever is smaller. 

What types of payments must be made electronically?  Answer:  It applies to all taxes due under Title 36 of the Maine Statutes.  For most taxpayers, it will include all taxes due to MRS, such as income tax, sales tax and use tax; and will apply to all such payments of those taxes, such as income taxes payable by quarterly estimates, extension payments, and final payments that in the past would have accompanied an income tax return.

What caused this to apply when it did?  Answer:  For the most recent round of taxpayers to become subject to these rules, they applied only after two things occurred.  First, in the 12 month period ended June 30, 2014, they paid taxes of at least $12,000 to MRS.  Second, MRS notified them that the criteria were met and that they now are subject to the e-payment requirements.  (That notification was the purpose of the letters that many received.)

What do I need to do first? Answer:  Register as a participant in the e-payment program within 30 days of the date of the notice.  You can do that on MRS’ EFT homepage.

Which payment is the first one that must be paid electronically? Answer:  There is a grace period that runs until 60 days following the registration date.  Any payments due on the 60th day or later must be made electronically.

I see reference to a number of different payment methods and terms, such as ACH debit, ACH credit, Teledebit, Maine EZ-Pay, I-File and EFT.  What does all this gibberish mean, and which method do I use?  Answers:  EFT (electronic fund transfer) describes this entire system.  The other terms are subsets of it.  Most taxpayers are likely to use the EZ-Pay system.  Once registered, its users will simply log into the MRS website via internet to initiate a payment each time one is due (including quarterly estimates and payments due with an extension or return).  By doing so, funds will be moved electronically from the taxpayer’s designated bank account to the MRS bank account.  Others may opt for the Teledebit method, which involves payment by telephone.  I-File relates to payment made at the time certain returns are filed electronically.  The ACH credit method involves an arrangement with MRS’s banking institution, but will still require the taxpayer to initiate action at his or her own bank each time a payment is made.  As noted above, most users opt for the EZ-Pay method. 

Do payment deadlines remain the same under the e-payment system? Answer: Technically the dates remain unchanged, but procedurally, most of these transactions generally must be initiated at least one day prior to the payment deadline date. 

Once begun, must I pay electronically indefinitely?  Answer:  If your current and expected future tax owed to MRS drops below the threshold (and that number keeps changing; it is $10,000 for 2015), you can apply for a waiver.

More and more taxpayers are subject to these electronic payment requirements because the threshold keeps dropping.  Many received somewhat generic notices many months ago informing them of these rules, and those earlier notices pointed out that if applicable to that particular recipient, more information would follow later.  “Later” has come for many taxpayers with an apparent flurry of notices sent by MRS this month, and with it comes the requirement to register within 30 days.  We encourage our readers who received one of these recent notices to register, or if appropriate, apply for a waiver.

We hope this information is helpful to you.  More information can be found in MRS “Rule 102” and the MRS website provides more information on its EFT and EZ Pay pages.  As always, if you have any questions, do not hesitate to call your BNN tax professional at 1.800.244.7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.