The IRS has proposed regulations allowing the agency to directly accept tax payments by credit or debit cards without having to connect taxpayers to third-party payment processors.
Currently, the IRS utilizes third-party processors to process payment of taxes by credit cards, which include 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. This provision enables taxpayers to pay 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 proposed regulations would authorize the IRS to enter into contracts in which the agency pays a fee to a third party to process a taxpayer's payment. By law, the IRS must seek to minimize any fee it is required to pay under such a contract. If the IRS does pay a fee, under the proposed regulations, the IRS would fully recoup the amount of the fee paid to the third party from the persons paying taxes by credit or debit card as a reimbursement fee.
The proposed regulations would also require that the taxpayer pay the reimbursement fee at the time of the credit or debit card tax payment. Section 6402 of the Code allows the Secretary to credit or refund any overpayment "in respect of an internal revenue tax." However, a reimbursement fee is not a tax, so the credit and refund procedures for tax overpayments would not apply here. Instead, the taxpayer would have to rely on existing rules adjusting credit or debit card payment errors, including reimbursement fee errors.
