The IRS has issued proposed regulations regarding the payment of taxes using credit or debit cards.
IRC section 6311(a) allows the IRS to receive payment for Internal Revenue taxes by any commercially acceptable means that the IRS deems appropriate to the extent and under the conditions provided in regulations. Existing Regulation section 301.6311-2 authorizes payment of Internal Revenue taxes by credit or debit card so long as such payments are made in the manner and in accordance with the forms, instructions, and procedures prescribed by the Commissioner of Internal Revenue.
In 2019, Congress passed the Taxpayer First Act (TFA) (Public Law 116-25). Prior to the passage of the TFA, IRC section 6311(d)(2) authorized the IRS to enter into contracts to obtain services related to receiving payment of taxes by credit or debit card, or charge card, but prohibited the IRS from paying any fee or other consideration under any such contract. Existing Regulation section 301.6311-2(e) prohibits the IRS from imposing any fee or charge on persons making payment of taxes by credit card or debit card. Currently, the IRS utilizes third-party processors to process payment of taxes by credit cards, which includes charge cards, and debit cards for which taxpayers pay a processing fee directly to the third-party processor. Third-party processors charge a variable percentage fee for payment by credit card and a flat fee for payment by debit card.
The TFA amended IRC section 6311(d)(2) by adding a discretionary exception whereby the IRS is no longer prohibited from paying a fee under a contract related to receiving payment of taxes by credit or debit card to the extent that the IRS ensures that any such fee is fully recouped from the persons paying taxes by credit or debit card pursuant to such contract. This provision enables the IRS to receive similar benefits as other entities that accept credit or debit cards, including guaranteed receipt of funds and reduction of paper check processing costs. This provision also enables taxpayers to make a payment more easily by credit or debit card directly to the IRS, such as over the telephone, without having to separately wait for the IRS to connect them to third-party processors. The TFA now gives the IRS flexibility to enter into a contract that would allow taxpayers to pay taxes by credit or debit card directly to the IRS.
The proposed regulations would amend existing regulations to conform to the TFA’s amendment to IRC section 6311(d)(2). The proposed regulations would remove both the prohibition of the payment of any fee by the IRS under any contracts related to payment of taxes by credit, debit, or charge card, and the prohibition on the IRS imposing any fee or charge on persons making payment of taxes by credit or debit card.
