The Internal Revenue Service (IRS) on July 2 proposed rules changes that would allow taxpayers to directly make tax payments by credit or debit cards.
For taxpayers wishing to pay with a credit card, the companies charge a fee that’s a percentage of the payment amount. Those paying with debit cards are charged a flat fee of just over $2.
Two existing restrictions have so far prevented the IRS from directly accepting tax payments by credit or debit cards. One regulation prohibits the IRS from paying any fee to use a third-party service to process taxes paid with credit and debit cards. The other prohibits the IRS from imposing any fee on individuals who pay taxes using those options.
By law, the IRS must seek to minimize such a fee. If the IRS does pay a fee, under the proposal, the IRS would pass that burden on to the taxpayer by charging for the “reimbursement” due with their taxes.
Important to note is that since a reimbursement is not a “tax,” the normal credit and refund procedures for tax overpayments won’t apply. That means if you have any issues related to that fee, you'll need to go through the usual procedures for resolving bank card payment errors.
Finally, the new regulations would authorize the IRS to continue using third-party payment processors regardless of whether the IRS pays a fee, so long as it helps reduce of expenses incurred when handling the tax payments.
“Expanding taxpayers’ payment options generally encourages tax compliance, so it is beneficial for both the government and taxpayers,” the agency added.
The proposed changes are based on provisions of the Taxpayer First Act, which became law in July 2019 as part of an effort to transform the IRS into a more taxpayer-friendly agency.
The Trump-era law, among other things, “gives the IRS flexibility to enter into a contract that would allow taxpayers to pay taxes by credit or debit card directly,” according to the IRS.
The proposal now enters a 60-day public comment period ending Sept. 3.
