IRS Finalizes Rules for Direct Credit and Debit Card Tax Payments
The Department of the Treasury and the Internal Revenue Service have issued final regulations under Treasury Decision 10060 that establish a regulatory framework allowing taxpayers to pay federal taxes via credit and debit cards directly to the government. Implementing directives established by Congress under the Taxpayer First Act, the updated rules permit the IRS to manage card transactions in-house—such as through phone or online channels—rather than relying strictly on third-party payment processors.
Historically, federal tax statutes prohibited the IRS from absorbing contract fees associated with processing credit and debit card payments. Because of that restriction, taxpayers seeking to settle tax obligations with payment cards were routed to external third-party processors, which collected separate transaction charges. The finalized regulations eliminate this prohibition, granting the tax agency authority to enter into merchant processing contracts as long as all processing expenses are fully recouped from the paying taxpayer.
For individual taxpayers, business owners, and property investors, the practical implication centers on fee structure and refund restrictions. Any processing reimbursement fee charged by the IRS must be collected at the precise time the tax payment is executed. Furthermore, the regulations specify that these processing fees are completely non-refundable and cannot be claimed as an overpayment credit under Section 6402, even if the underlying tax bill is later reduced or refunded.
The IRS anticipates that receiving card payments directly will lower paper-check processing costs and grant the agency guaranteed fund settlements typical of standard card processing systems. Treasury Decision 10060 adopts the proposed rules issued in July 2024 without modifications after receiving public comments that broadly favored the transition. The regulations apply to tax payments and related processing fees incurred on or after the publication date in the Federal Register.
Source: Journal of Accountancy
