NPRC Studies & Recommendations

ACH Credit is Needed for High-volume Tax Payments

Most tax authorities enable employers to pay employment taxes (such as income tax withholding, unemployment insurance, etc.) through a state Employer Portal, generally through an Automated Clearing House (ACH) debit transaction. While ACH debit is appropriate for low volume, one-at-a-time transactions like those made by individual employers, it is not appropriate for high volume remitters such as payroll processing service providers, which often originate tens of thousands of tax payments to each agency on any given day. Instead, ACH credit is a requirement and the industry standard for large payroll firms. ACH credit provides the same electronic payment and posting information as ACH debit. ACH credit has been the industry standard for electronic payment to hundreds of state and local tax authorities for over 30 years and it is even the method chosen by tax administrators to issue high volume electronic refunds and stimulus payments to taxpayers. This brief explains why ACH credit is necessary for high-volume tax payment administration.