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1997-08-06 13:42:37


U.S. Treasury: No Checks Accepted (1999)



The United States Treasury Department will force everyone to send money to the Treasury by computer hook-up only by Jan. 1, 1999. This is just in time to get everyone tied to computers that will go down in 2000. It is one more example of blindness on the part of the U.S. government.

This article appeared in US BANKER (July 1997). I include excerpts.

* * * * * * * *

In a sweeping three-pronged drive, Washington is moving to eliminate the flow of paper checks out of the federal treasury by December 31, 1998. The inflow of checks for employer-withheld tax payments will end for all but the smallest businesses. A checkless U.S. Treasury will affect tens of millions of individuals who receive government payments or in-kind benefits, millions of businesses that withhold taxes from their employees, and the small and large banks that service all of the above. An annual flow of a billion electronic payments worth about a trillion and a half dollars -- one-fifth the value of the gross domestic product -- will speed the economy's transition to a new era of paperless transactions, digital cash, and "wallets" embedded in plastic cards.

The campaign, directed by the Treasury Department's Financial Management Service (FMS), has three related parts: EFT99, which says that all federal payments to individuals or businesses must be made electronically; Electronic Benefits Transfer (EBT), which says that paper food stamps must be replaced by debit cards and that cash benefits must be delivered electronically; and Electronic Federal Tax Payment Service (EFTPS), which says that companies over a certain size must pay withholding taxes electronically. . . .

EFT99 means no more federal checks

The audacious goal of the Electronic Funds Transfer Expansion Act of 1996 is to totally eliminate paper checks in federal benefit and vendor payments by January 1, 1999.

Serving the "unbanked"

The great majority of Treasury's payments are Social Security retirement and disability benefits made to individuals who live and bank in every part of the country. Over the next 18 months, that flow will increase by half and will be required by law to include about ten million recipients who don't now have relationships with any financial institution-the so-called unbanked. Clearly, servicing the unbanked presents a marketing opportunity for banks everywhere. Not at all clear is whether reaching this little-understood group is likely to be a profitable undertaking. . . .

Another major implementation issue is delivering remittance advices to vendors along with direct deposits made in payment for supplying goods and services to the federal government. More precisely, the issue is vendors' ability to receive the electronic remittance information. This requires that a vendor or its bank be equipped with software that can interpret the codes describing the payment: dates, buyer, product price, etc. In electronic commerce, this capability is a key element of electronic data interchange (EDI), and the codes are standardized in national and international protocols. FMS says that it uses these standard codes and will work with vendors and their banks on implementation problems. Banks that aren't yet EDI-capable (most banks) will either have to add the capability or forego the possibility of serving corporate customers who do business with the federal government. FMS is also working on alternatives, such as delivering the remittance information via Internet e-mail. . . .

Paying payroll taxes electronically

Treasury not only wants to eliminate all of the paper checks it sends out; it also wants to stop receiving them-at least from business taxpayers-by New Year's Day 1999. That's the goal of the electronic federal tax payment system (EFTPS).

The program is being phased in from the top down, taxpayers with the biggest payments first. By July 1 of this year, taxpayers who withheld $50,000 or more for employee taxes in the 1995 tax year were required to sign up for EFTPS. That meant about 1.2 million businesses. The threshold will go down to $20,000 in the 1999 tax year, covering almost all businesses except the self-employed. That means it will affect virtually all banks, too. . . .


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