IRS Finalizes Rules for Credit and Debit Card Tax Payments
The IRS has finalized regulations implementing provisions of the Taxpayer First Act of 2019, allowing the agency to directly accept tax payments made by credit and debit card without requiring taxpayers to navigate to a separate third-party payment processor website. Previously, taxpayers making payments by card were directed to IRS-approved processors and paid processing fees directly to those providers. The Taxpayer First Act amended Internal Revenue Code Section 6311(d)(2) to authorize the IRS to pay fees associated with these transactions, provided the agency fully recoups those costs from taxpayers.
The final regulations permit the IRS to contract with third-party payment processors even when the agency must pay processing fees under those agreements. However, the IRS must minimize these fees and may enter into contracts only when doing so is cost-beneficial to the government. Taxpayers who pay their taxes by credit or debit card must reimburse the IRS for applicable processing fees at the time of payment, and the IRS may not retain any portion of the fees collected. The final regulations adopt the IRS’s 2024 proposal without changes and took effect October 19, 2026.
IRS Addresses Tax Consequences of Dividing a Grandfathered GST-Exempt Trust
The IRS has issued a private letter ruling concluding that dividing a grandfathered generation-skipping transfer (GST) tax-exempt trust into three separate trusts will not result in adverse tax consequences, provided certain requirements are met. The trust was established and became irrevocable before September 25, 1985, and the proposed division would allocate assets pro rata among three new trusts of equal value for the settlor’s great-grandchildren. Under applicable regulations, a modification to a grandfathered trust generally will not jeopardize its GST tax-exempt status if it is authorized under state law, does not shift beneficial interests to beneficiaries in lower generations, and does not extend the time for vesting of any beneficial interest. The IRS determined that the proposed division satisfied these requirements and would preserve the grandfathered status of both the original trust and the resulting trusts.
The IRS also concluded that the division would not be treated as a taxable sale or disposition of property, and no gain or loss would be recognized by the trusts or their beneficiaries. Since the division does not change the beneficiaries’ beneficial interests, it also will not constitute a taxable gift. Additionally, the assets transferred to the resulting trusts will retain their original adjusted basis and holding periods. This ruling highlights the potential flexibility available when dividing grandfathered trusts to accommodate beneficiaries’ differing investment objectives and distribution needs, while preserving important tax benefits.
IRS Proposes Changes to Premium Tax Credit Verification and Repayment Rules
The IRS has issued proposed regulations implementing changes to the premium tax credit (PTC). The proposed rules would strengthen health insurance marketplace verification procedures for determining PTC eligibility, including requirements related to citizenship, residency, and household income. These verification changes would generally apply to taxable years beginning after December 31, 2027. The regulations also address how Medicaid community engagement requirements, which states must implement by January 1, 2027, affect eligibility for the credit. Generally, taxpayers who are ineligible for Medicaid solely because they fail to satisfy these community engagement requirements will be treated as eligible for minimum essential coverage and therefore will not qualify for the PTC.
The proposed regulations also reflect the elimination of the repayment limitation for excess advance premium tax credits (APTC). For taxable years beginning after December 31, 2025, taxpayers will be required to repay the full amount of any excess APTC, without the previous repayment cap. This change could increase tax liabilities for individuals whose advance premium tax credit payments exceed the amount for which they ultimately qualify.
IRS Announces Tax Relief for Storm Victims in Nebraska and West Virginia
The IRS has announced tax relief for individuals and businesses affected by severe storms in Nebraska and West Virginia, extending certain federal tax filing and payment deadlines. Eligible taxpayers in Knox County, Nebraska, have until January 7, 2027, while those in Fayette, Harrison, and Kanawha counties in West Virginia have until February 4, 2027, to meet qualifying federal tax obligations. The extensions generally apply to individual income tax returns and payments due during the respective disaster postponement periods, as well as certain quarterly payroll and excise tax returns. Penalties on qualifying payroll and excise tax deposits may also be waived if applicable conditions are met. However, tax payments for 2025 individual income tax returns that were due April 15, 2026, are not eligible for relief, even if the taxpayer received an extension to file.
Affected taxpayers may qualify for additional relief, including more time to claim certain refunds or credits under the Disaster Related Extension of Deadlines Act, exclusions for qualifying disaster assistance payments, deductions for eligible uninsured or unreimbursed casualty losses, and certain retirement plan or IRA relief provisions. Taxpayers who receive a late-filing or late-payment penalty notice for a deadline covered by the postponement should contact the IRS using the number provided on the notice to request abatement. The IRS is also waiving standard fees for eligible disaster victims requesting copies of previously filed tax returns or transcripts..
Federal Reserve Plans Overhaul of Bank Supervision Structure
The Federal Reserve plans to restructure its bank supervision operations to strengthen accountability and streamline decision-making, according to Vice Chair for Supervision Michelle Bowman. Announced October 6, 2026, the proposed changes would establish five geographic supervisory regions, each led by a designated regional leader responsible for supervisory activities. Although examinations would continue to be conducted by staff at the regional Federal Reserve banks, the new structure would shift oversight away from regional bank presidents toward a more centralized and accountable framework. Bowman also called for streamlining the committees involved in bank supervision, arguing that the existing structure has contributed to delays and unclear responsibility when addressing risks. The changes follow concerns identified in an independent review of the Silicon Valley Bank collapse, which found that examiners were slow to take action.
As part of a broader effort to revise bank regulation, Bowman also announced that the Fed plans to consider updating asset thresholds that determine when banks become subject to stricter regulatory requirements. Potential changes include revising fixed-dollar asset limits and implementing a mechanism to adjust those thresholds every five years to reflect inflation and economic growth. These thresholds can trigger additional requirements related to capital, liquidity, and stress testing, and updating them could allow banks to grow further before facing more stringent oversight. The proposed reforms reflect the Fed’s broader emphasis on focusing examinations on material financial risks while reducing attention to less significant procedural deficiencies.
