The Internal Revenue Service (IRS) has announced that it is proposing new regulations that would allow taxpayers to pay their taxes using credit cards or debit cards. These proposed changes are based on provisions of the Trump-era Taxpayer First Act, which became law in July 2019. The goal of the Taxpayer First Act was to turn the IRS into a more taxpayer-friendly agency.
Currently, the IRS authorizes third-party processors to collect tax payments made with credit or debit cards and they don’t charge a fee for this service, but the credit card company does charge a fee which depends on which tax preparer/software you use.
However, if the IRS proposal is accepted (cuts out the middleman) and you use a credit card to pay your taxes, the IRS will begin to charge you a percentage of your tax bill, and if you use a debit card, it will be a flat $2 fee.
Up until now, two restrictions prevented the IRS from directly accepting tax payments by credit cards or debit cards. The first regulation prohibits the IRS from paying a fee to use a third-party service to process taxes paid with credit and debit cards. The second regulation prohibits the IRS from imposing any fee on individuals who pay taxes using those options.
The proposed rule change removes both of these restrictions and if implemented, it would authorize the IRS to pay a fee directly to a card issuer or a bank in order to process payments. These fees would be passed along to the taxpayer to be paid along with their taxes due.
The IRS says that expanding payment options for taxpayers generally encourages tax compliance, so they say it’s beneficial for both the government and taxpayers. I'm not sure about that, but I do know that the IRS has for years been trying to remove the financial institutions and tax preparation firms from making money by offering programs to taxpayers to receive their refunds earlier. This, along with the IRS free file program, are just more steps in removing the business community from having anything to do with basic tax services.