In today's tax system, there is a strange difference between paper and electronic payments. If you mail a paper check before midnight on the deadline, it counts as "on time," even if it takes days to arrive. But if you make an electronic payment at the same time, it could be considered late if the IRS does not process it until the next business day.
This creates a problem for finance teams that use modern payment systems. They can send a payment on time but still face a penalty because the IRS takes longer to process it.
The good news is that this may soon change. Two bills are moving through Congress to fix the problem. The Taxpayer Assistance and Service (TAS) Act (S. 3931) has passed the Senate Finance Committee, and the Electronic Filing and Payment Fairness Act (H.R. 1152) is also moving forward.
These are more than small changes. They would move the tax system closer to treating digital and paper filings the same way. For CFOs and Controllers, this could make cash flow planning easier and help improve internal controls.
1. Making Digital and Paper Equal: The Electronic Mailbox Rule
The main goal of the reform is to update Section 7502, which is known as the "mailbox rule."
In fiscal year 2023, the IRS received more than 213 million electronic filings. That was 79% of all tax returns. However, the legal protections that apply to paper mail have not always applied to digital submissions.
The TAS Act and H.R. 1152 would change this. They would make the transmission date, or the date you send something, count as the official delivery or payment date.
The Joint Committee on Taxation (JCX-4-25) says this change would have almost no effect on federal tax revenue. For finance professionals, this is important. Because the bill would not reduce government income, it may face fewer obstacles and has a strong chance of passing.
Finance takeaway: This change would reduce the risk of your company being penalized because of problems with the IRS's systems. However, there is one detail to watch in the Senate version (S. 3931). Electronic submissions must be "received" within three business days after the deadline to qualify. Your IT and tax teams will need to plan for this small buffer.
2. Fixing the Calendar: Moving to Real Three-Month Quarters
For years, corporate tax departments have dealt with a "quarterly" payment schedule that is not actually quarterly. The current gaps between payments are 3, 2, 3, and 4 months. This makes cash planning harder than it needs to be.
The proposed laws would change the deadlines to true three-month intervals.
Current schedule: April 15, June 15, September 15, and January 15.
Proposed schedule: April 15, July 15, October 15, and January 15.
Finance takeaway: This is about more than making the calendar easier to understand. The new schedule would better match standard corporate reporting cycles. It could reduce the work needed to calculate payments for uneven periods, lower the risk of underpayment penalties, and make cash flow forecasts easier for treasury teams.
3. From Information Gaps to Evidence-Based Planning
A lack of information has long been a problem between the IRS and taxpayers.
The TAS Act would require the IRS to create public dashboards that show information about backlogs and response times. These dashboards would cover phone lines that receive at least 200,000 calls each year, so the data focuses on the biggest problems.
Finance takeaway: These public numbers could provide useful evidence for financial reporting.
Under ASC 740, the accounting standard for income taxes, deciding when to recognize tax assets such as refunds requires judgment. For example, if a public dashboard shows that the IRS has a six-month backlog for amended returns, Controllers could show external auditors this information as evidence for why a refund is still on the books.
This would strengthen internal control documentation and help finance teams explain the situation to the Board using data instead of guesses.
4. A New Safety Net for High-Net-Worth Risk Management
The TAS Act would create a new safe harbor, which is a type of legal protection, for the failure-to-pay penalty.
This penalty can surprise individual taxpayers, especially high-net-worth business owners, when their final tax bill is higher than they expected.
The new rule would remove failure-to-pay penalties for individuals who make estimated payments equal to 125% of the previous year's tax bill by the original deadline.
Finance takeaway: For closely held businesses or high-net-worth clients whose final tax numbers may change during an audit, this could be an important risk-management tool.
By paying 125% of the previous year's amount, taxpayers could get a penalty-free extension. This would give the tax team more time to finish complex partnership forms, such as K-1s, without worrying about penalties continuing to grow.
5. Expanding Tax Court Authority: More Options for Refund Cases
One of the biggest changes would expand what the U.S. Tax Court can handle.
Currently, refund lawsuits can only be filed in U.S. District Courts or the Court of Federal Claims. The TAS Act would also allow the Tax Court to hear refund cases of up to $2 million.
It would also raise the limit for "small tax cases" from $50,000 to $100,000.
In addition, S. 3931 would allow the Tax Court to order refunds in Collection Due Process (CDP) cases. This would give taxpayers a way to handle both tax liability and refund issues in one specialized court.
Finance takeaway: The Tax Court focuses on tax law and has strong technical knowledge. Allowing refund claims to be heard there instead of in District Courts, which handle many different types of cases and can often move slowly, could lead to faster and more accurate decisions.
For corporate taxpayers, this could make tax disputes more efficient and give them access to a court that understands complex tax structures.
Featured Industry Perspective
Melanie Lauridsen, AICPA Vice President of Tax Policy and Advocacy, explains why these reforms matter:
"The TAS Act represents an important step towards creating a more effective and taxpayer-focused tax administration system. This bill includes provisions that will strengthen taxpayer support while also helping ensure paid tax preparers meet minimal ethical and professional standards that reinforce Americans' trust in our profession and in the tax system."
Conclusion: The Path to Modernization
The House has usually focused on fixing specific problems one at a time, such as the mailbox rule in H.R. 1152. The Senate's TAS Act takes a broader approach to modernizing the tax system.
Many provisions would take effect after December 31, 2025, and the legislative path looks clear.
These reforms would do more than make small changes to the IRS. They would create a framework for a tax system that is more transparent and fair to digital users. They could also improve how the government works with finance departments.
Strategic question: If your tax department no longer has to plan around IRS processing delays and can show auditors real-time backlog data, how would that change your year-end cash management and ASC 740 strategy?
Sources
AICPA Endorses Provisions of Tax Administration Simplification Act | News
Description of HR 1152, the “Electronic Filing and Payment Fairness Act” - Ways and Means Committee
Electronic Filing and Payment Fairness Act (H.R. 1152) - Ways and Means Committee
New TAS Act: Senate Tax Administration Bill Update - BDO USA