TAS Act: Timely Submitted Payments and Electronic Documents

Earlier this year, a significant step toward modernizing tax processes was taken with the introduction of the Taxpayer Assistance and Service or “TAS” Act. This groundbreaking discussion draft, released by Senator Mike Crapo, chairman of the Senate Finance Committee, and Senator Ron Wyden, the committee’s ranking member, aims to address various inefficiencies and imbalances in the current tax system. As highlighted in a previous blog, the discussion draft contains 68 provisions, with about 40 of them reflecting recommendations from TAS. One of the key provisions advocates for extending the statutory “mailbox rule” to electronic tax filings and payments.

 

What’s the Current Problem?

To understand the significance of this provision, it’s essential to first understand the existing issue.  Under the current law, the IRS applies the “mailbox rule” in IRC § 7502 to paper submissions. This rule allows the IRS to consider the payment or the filing of a tax return timely as long as it is postmarked by the due date, even if received days or weeks later. However, the “mailbox rule” does not apply to the electronic transmission of payments or to the electronic filing of time-sensitive documents, except documents filed electronically through an electronic return transmitter. So, if the taxpayer submits the same tax return or payment to the IRS electronically on the due date, the IRS may consider the return or payment late if the IRS receives and processes it the next day. This dichotomy can harm taxpayers who make timely electronic submissions and payments, and it favors paper transmission over electronic transmission – exactly the opposite incentive the rules should provide.

 

The IRS encourages taxpayers to make payments electronically, often by using the Treasury Department’s Electronic Federal Tax Payment System (EFTPS). But here’s the catch – EFTPS has a strick cutoff time. The EFTPS website displays the following warning: “Payments using this Web site or our voice response system must be scheduled by 8 p.m. ET the day before the due date to be received timely by the IRS” (emphasis in original). This limitation applies to all payments. Based on the bolded language on the EFTPS website, if a taxpayer owes a balance due on April 15 and submits the payment using EFTPS, the payment will be considered late if submitted after 8 p.m. on April 14 (28 hours earlier), even though the payment generally would be debited from the taxpayer’s account on April 16. In contrast, if the same taxpayer mails the payment to the IRS before midnight on April 15, the payment will be considered timely, even if it takes a week or longer for the IRS to receive, open, and process the check. This discrepancy makes little sense. This different treatment of mailed and electronically submitted payments makes little sense and may discourage electronic payments. As compared with a mailed check, an electronic payment is received more quickly, is cheaper to process, and eliminates the risk that a mailed check will be lost or misplaced. And yet, the current rules regard paper submissions over electronic ones, which undermines the IRS’s efforts to modernize and promote digital transactions.

 

The IRS does have some flexibility in how it treats electronically submitted payments. Despite the warning on the main EFTPS website, the related FAQs provide circumstances in which the IRS will credit both business and individual tax payments on the date the payment is made. For example, the FAQs state that business tax payments of $1 million or less made before 3 p.m. Eastern Time (ET) on the due date will be considered timely. While 3 p.m. ET on the due date is certainly better than 8 p.m. ET the day before the due date, the FAQs do not go far enough. It is also unclear why the more flexible time periods are buried in the FAQs. These limitations and the temporary nature of FAQs and website information do not allow taxpayers to consistently rely on the timeliness of electronically submitted payments.

 

The TAS Act Amendment: A Step in the Right Direction

The proposed solution, similar to my recommendation in the National Taxpayer Advocate 2025 Purple Book, § 905 of the TAS Act would amend IRC § 7502(c) to extend the mailbox rule to electronic submissions and payments using transmission methods permitted by the Treasury Secretary. In otherwords, as long as a taxpayer submits their payment or document electronically by the due date, it would be treated as timely regardless of when the IRS processes it.

 

Note: On March 31, 2025, in a standalone bill sponsored by Representatives Darin LaHood, Suzan DelBene, Randy Feenstra, Bradley Scott Schneider, Brian K. Fitzpatrick, and Jimmy Panetta, the House of Representatives passed H.R. 1152, Electronic Filing and Payment Fairness Act, which is similar to TAS Act § 905.

 

Why this Matters

 

The reform proposed in the TAS Act would create a fairer, more efficient tax system. It removes the current inconsistency between paper and electronic submissions, aligning the treatment of digital and traditional methods. By incentivizing electronic filings and payments, the IRS can improve processing times, reduce costs, and enhance overall accuracy and taxpayer experience. Additionally, it could reduce potential for confusion and mistakes that taxpayers currently face when attempting to meet deadlines.

 

This change would not only help individual taxpayers but also benefits businesses, particulatly those making large payments that must adhere to strict deadlines. The amendement aligns with the overarching goal of modernizing the tax system and making it more responsive to the needs of taxpayers in the digital age.

 

How You Can Get Involved

 

The tax-writing staffs have released this text as a “discussion draft” and are soliciting public input before they develop a final bill. As a tax professional or concerned citizen, your input could help refine this legislation, ensuring it best addreses the challenges taxpayers face today. I strongly encourage the tax community to review this draft carefully and provide comments to refine it. You can find the section-by-section bill summary and the full text of the draft bill on the Senate Finance Committee website. Let’s ensure that our voices are heard in shaping a tax system that works for everyone.

 

Resources

• Senate Finance Committee Press Release: Crapo, Wyden Issue Discussion Draft to Improve IRS Administration
• Taxpayer Assistance and Service Act Section-by-Section Bill
• Taxpayer Assistance Service Act Draft Bill
• H.R. 1152 – Electronic Filing and Payment Fairness Act

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