Success Stories: U.S. Treasury

Sage Compliance Services provides the U.S. Government with the world's first Web-native online payroll tax solution.

U.S. Treasury Department Profile

  • The Financial Management Service (FMS), one of 12 bureaus of the Treasury Department, is the U.S. Government's cash manager.
  • Disburses in excess of $1 trillion annually in 860 million non-defense payments, which includes government payroll.
  • Manages the world's largest collections system, gathering $1.5 trillion annually in Federal revenues.
  • Must handle payroll tax collection and reporting for all U.S. Government employees.

The Challenges

Inadequate legacy system. In the early 1990's, FMS implemented a system to automate the payment of taxes by Federal agencies and the filing of IRS form 941. Known as FEDTAX, this system was running on legacy hardware, was inadequate to handle increasing volumes, and was not Y2K-compliant. An online payroll service that was capable of handling such an amount of information with improved, updated technology and services was required.

Diverse agencies to be supported. The Treasury Department needed to create a new, state-of-the-art tax automation solution that could handle the diverse tax needs of hundreds of federal agencies.

Complex requirements. In order to transition agencies and users as quickly as possible, the system must utilize state-of-the-art technology, have built-in tax compliance capability, and be easy to use. It must also be extremely secure, since it would handle billions of dollars of tax payments annually.

The Solution

Compliance Services, under contract to CashTax (First Data Corp.) and Bank of America, developed FEDTAX II, the world's first Web-native application to automate the payment of payroll tax payments and reports. The online payroll service was implemented in July 1998 to coincide with the beginning of a new quarterly filing period.

The Results

Web-based functionality meets customer needs. The Web-native FEDTAX II system delivers comprehensive compliance services via the Internet and automates the tasks associated with payroll tax compliance, including federal tax deposit calendars, cash management, electronic tax payments, and multiple reporting sites.

High volumes processed with ease. Nearly 400 government agencies are already using the new system, with more being added monthly. More than $40 billion of the $1.5 trillion in Treasury's annual collections are currently handled by the online payroll service, with volume expected to increase significantly as new agencies are brought online.

Award-winning solution. On Oct. 8, 1998, FMS received the Alexander Hamilton Award for Excellence in Treasury Management. The award, sponsored by Treasury and Risk Management magazine, recognized FMS for its technology advancements on the online payroll service FEDTAX II system.

What the Client Said

"FEDTAX II provides the Treasury Department with improved tax classification reporting, and it provides government agencies a fast, convenient, and safe way to make their tax payments."

- Paul Gist,
Director of FMS Financial Services Division

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