The IRS issued today a final ruling allowing the agency to directly process credit and debit cards for tax collection, without the need to route it through a third party processor. Previously, they were barred from paying payment processors and from charging processing fees. Going forward, they’re allowed to pay fees and pass on the charges.
Note: There is no change taking place right now. This is just a ruling. If/when the IRS does set up their own payment processing, they’ll pass on the fees to the consumer.
Logically, the fees could end up slightly lower since the IRS is barred from profiting on the fees and is required to seek to minimize fees. Whatever profit margin the third party processors were getting should get trimmed off if they take payments directly.
In practice, it’s anyone’s guess how it will play out, and whether the IRS will differentiate in the cost between personal cards and business cards. It is also possible that the IRS will start taking direct payments and still allow third party processors to work as well.
Hat tip to reader Raymond
