In a letter sent to the Treasury Department, the AICPA gave recommendations on the implementation of Executive Order 14247, "Modernizing Payments To and From America’s Bank Accounts."
“For many years, the AICPA has advocated for and supported the modernization of the IRS and its payment systems; although this executive order is a step in the right direction, there are many considerations before implementing changes, which means updated processes and carefully tailored rules will need to be developed,” noted Daniel Hauffe, senior manager for AICPA's tax policy and advocacy. “The AICPA’s recommendations allow for the modernization of the IRS’ tax payment systems while mitigating the impact of the administrative burden on taxpayers, tax practitioners and the IRS that could be caused by this executive order.”
The order mandates the Treasury Secretary to stop issuing paper checks for all federal disbursements and requires all payments from the federal government be processed electronically. The order also says that issuing paper checks for federal disbursements must be stopped by Sept. 30. Additionally, it states that all federal receipts must be processed electronically as soon as possible and to the extent allowed by law.
The electronic system adoption for federal disbursements and receipts would promote efficiency, lower expenses and considerably limit the number of lost or stolen checks. The AICPA has been supporting the transition to electronic payments for federal disbursements and receipts. But, there are challenges with the implementation of a system that requires taxpayers to have a U.S. bank account to make electronic payments.
Mandating a U.S. bank account for electronic tax payments could exclude vulnerable taxpayers including seniors and the “unbanked” population while international banking rules limit automated clearing house transfers with non-U.S. financial institutions.
The AICPA’s letter mentions the Treasury Inspector General for Tax Administration’s
report about the 2024 filing season that states that, for the most recent tax year, close to 7 million taxpayers were issued refunds via a method other than electronic payment.
The AICPA is asking the U.S. Treasury to consider these recommendations:
• Make exceptions for individuals and business entities not physically present in the U.S. without a U.S. bank account.
• Exempt temporary non-U.S. individuals—including short-term business visitors—from electronic payment mandates, letting them get tax refunds by paper check. AICPA also suggests allowing those without a Social Security Number or individual taxpayer identification number to make tax payments by check until their taxpayer identification is issued, helping them meet their obligations without penalties.
• Expand Electronic Federal Tax Payment System (EFTPS) capabilities, which would let business accounts submit payments on behalf of individuals for Form 1040 and 1040-NR such as estimated tax payments, extension payments and balances due. There should be no limit to the number of individual transactions a business account are allowed to process.
• Exempt all trust and estate income tax return filings from the requirements of the order until Form 1041 has been updated with the right information and that implementation of the order be postponed for trusts and estates until the Treasury and IRS can address certain issues about the administration of an estate or trust. Additionally, the AICPA recommends that Treasury and the IRS let trusts and estates pay via IRS Direct Pay instead of having to set up an EFTPS account.
• Offer specific guidance on how exceptions will be applied for and given to qualified taxpayers for whom the order can be an undue burden. These include those over the age of 65 as well as taxpayers who cannot get U.S. bank accounts. The AICPA also suggests that taxpayers who were given an exception can receive tax refunds as a paper check or via a direct express card.
• Extend the time for the order's implementation or, at a minimum, the Secretary offer meaningful transitional rules when facilitating the transition of the federal disbursement and receipt system to being exclusively electronic.
• Try seeking statutory authority for the mandates in the executive order that offer a solid foundation for the transition to electronic payments.
• Convene a group of stakeholders, such as the AICPA, to help with the establishment of rules and processes for implementing the order.
