When payments are made using the ACH Network for specific purposes, banking conventions provide a standardized way to format additional detailed information so the payment is more easily and readily applied. Nacha has three such banking conventions that are actively used: Tax Payment, Third-Party Tax Payments and Child Support. The linked implementation guides contain an overview of the formatting for each convention; for complete information on ACH Record Formats, see the Nacha Operating Rules.
(revised December 2012)
This convention simplifies taxes for businesses by allowing them to transmit an ACH credit payment, with remittance detail, in a single transaction. Nacha has collaborated with industry partners to make TXP the standard means of business tax remittance, in a Corporate Credit or Debit (CCD) transaction, for the majority of the states, as well as many cities, counties and municipal tax authorities.
(revised July 2013)
The TPP convention provides information for third parties making state and Federal tax payments on behalf of a consumer. Nacha has established this convention at the request of the industry to standardize ACH payment remittance information provided to revenue authorities. Utilizing the TPP convention allows for the necessary identification of the third-party payer and the taxpayer for whom the payment is being made, for example:
- When employee tax withholdings are remitted by payroll service providers on behalf of employers.
- When employers remit payments in response to tax agency orders to produce employee wages for tax liability.
(revised February 2017)
This banking convention automates child support obligations, making it easy for an employer to electronically withhold the required portion of an employee’s paycheck and send that amount to the State Disbursement Units (SDUs). All SDUs are capable of accepting employer-originated child support withholding payments in this format.