IRS is doing this because EFTPS is much more accurate and much less burdensome for taxpayers and it saves the goverment money because there are fewer errors.

Beginning in 2005, IRS will automatically determine which employers have achieved the four quarters of EFTPS compliance and reverse the most recent full-paid FTD penalty minus any outstanding taxes. The refunds will be issued on a quarterly basis following the scheduled Form 941 due dates. No other action by the emplyer is necessary. IRS will look back up to four quarters before the four-quarter compliance period for a full paid FTD penalty to abate. For example, if an employer starts using EFTPS and uses it for all four quarters in 2004, the computer will look back as far as the quarter beginning Jan. 1, 2003, for a full paid FTD penalty. Penalties paid earlier than one year before the four-quarter compliance period are not eligible for the automatic offer.

An employer does not have to start using EFTPS at the beginning of the calendar year in ofer to qualify for the refund. Quarters in which a seasonal business doesn't have any employees won't count. Seasonal employers must use EFTPS for four quarters but the four quarters may be spread out over more than 12 months.

Suppose an empoyer voluntarily enrolled in EFTPS before IRS announced the refund offer. The IRS web site says that employers who began using EFTPS before the opening of the offer won't be disqualified. When the first batch of refunds is issued in 2005, the IRS computers will look for quarters of EFTPS use. Each consecutive "extra" quarter (up to four) will extend the refund look-back period by a quarter, provided the statute of limitations for issuing the refund is not expired.