A recent executive order sets the wheels in motion for mandatory electronic payments to and from the IRS. How does this affect an accounting firm’s risk?
By CNA Accountants Risk Control
On March 25, 2025, President Donald J. Trump signed the Modernizing Payments To and From America’s Bank Account executive order (“EO”), the aim of which is to streamline federal payment and disbursement systems as well as help reduce fraud.
In accordance with the EO, effective September 30, 2025, all payments from the U.S. government will be made electronically, to the extent permitted by law, including income tax refunds from the Internal Revenue Service (“IRS”). In addition, the EO specifies that all payments to the U.S. government, including tax payments to the IRS, shall be made electronically as soon as practicable.
On September 23, 2025, the IRS issued the new release, Modernizing payments to and from America’s bank account. This news release provides information regarding changes to refund and disbursements methods and electronic payment options, advancing the transition to fully electronic payments.
Failure to comply with electronic payment requirements may result in penalties, interest, or other adverse consequences for taxpayers. In turn, the taxpayer may blame their tax preparer for these adverse consequences.
Risks to CPA Firms
Clients that have been accustomed to paying by check or other non-electronic method may balk at a seemingly abrupt change in payment method. These clients will need additional time to establish their ability to make tax payments electronically.
If a client is unable to make a payment to the IRS on a timely basis and incurs penalties and interest due to the late payment, the client may assert a professional liability claim against the CPA for failing to provide them with adequate and timely notice of the change to enable the client to respond accordingly.
What should I do if a client or prospective client asks for assistance with making electronic tax payments?
Some CPA firms may be asked to take on additional responsibilities and initiate payments on behalf of clients or may feel compelled to do so in the spirit of client service. However, assisting a client with their tax payments, electronic or otherwise, increases a firm’s risk and leads to additional opportunities for a professional liability claim.
How might a claim arise?
- The CPA firm fails to make the payment timely. In 2024, 39% of tax claims asserted against firms in the AICPA Professional Liability Insurance Program stemmed from missed or untimely filed returns. While most CPAs believe they have procedures to help prevent this from occurring, claim experience indicates otherwise. Agreeing to make estimated tax payments on behalf of clients typically provides at least four additional due dates to track and comply with, multiplying the opportunity for a missed deadline fourfold.
- The CPA keys in the wrong routing or bank account number and the payment is not received by the IRS.
- The CPA initiates a payment for an incorrect payment amount resulting in an underpayment. Even if a payment initiated by the CPA was made for more than was required, the client may blame the CPA for the lost investment opportunity or other use of funds.
- The client has insufficient funds when the CPA initiates the payment, it is rejected by the IRS, and the client asserts that the CPA failed to provide sufficient time for the client to gather the funds. Similarly, the client could assert that they had to sell assets at a loss or incurred taxes on assets sold at a gain because they had an insufficient amount of time to gather the funds.
- The client closes their account without notifying the CPA, and the CPA does not have sufficient time to ensure timely processing of the payment.
Other risks exist beyond the risk of an error in the timeliness and accuracy of client tax payments. The additional information maintained by the firm related to a client’s financial information presents its own risk of a claim, such as the following:
- An employee of the CPA firm may misuse bank account information and divert funds for personal use. In other words, an employee may steal from a client.
- A data security incident may be more impactful and costly.
Risk Management Strategies
All firms should consider the following to inform clients about changes created by the EO.
Client notification
Consider notifying all clients of the upcoming requirement to make payments electronically, including a description of the various methods by which payments can be made, any registration requirements, and applicable links for more information. If notification is accomplished via a newsletter, client alert or similar communication, retain copies of the communication and the distribution list. A sample Client Notification Letter is included in Appendix A.
Consider creating a video to walk clients through the process of how to make payments electronically. The video or screenshots with instructions could be sent to clients to assist them in making the transition. As the proverb goes, give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.
Engagement letter provisions
Outline the client’s responsibility for making payments in the engagement letter. A sample provision follows:
You have final responsibility for the payment of your taxes in whatever amount ultimately determined. You may be required or choose to have funds automatically withdrawn from a designated account and transmitted when your tax return is electronically filed. We will not transmit partial payments. Likewise, you may be required or choose to have any overpayment electronically deposited into a designated account. It is your responsibility to provide us with correct account and routing numbers, to review this information for accuracy prior to submission of your return, and, as applicable, to ensure that sufficient funds are available at the time of payment. We shall not be liable for any tax, penalties, interest, related professional fees, or other expenses you may incur as a result of your failure to provide an accurate routing or account number or to ensure sufficient funds are available at the time of payment.
Moreover, your engagement letter can reinforce the message that payments must be made electronically by including a provision such as the following:
The Modernizing Payments To and From America’s Bank Account Executive Order, signed on March 25, 2025, mandated that all payments from the U.S. government after September 30, 2025, must be made electronically. All payments to the U.S. government, including quarterly estimated tax payments, should be made electronically as soon as practicable. Assisting you with electronic payments is not part of the scope of our services. You are responsible for transmitting all payments electronically.
What if I want to help my clients with payments?
Ideally, clients will initiate payments on their own behalf, as they have traditionally done with estimated tax vouchers. However, some clients may request the CPA firm’s assistance, and some CPAs may believe that, in the spirit of client service, they should help.
Before such requests are received, a CPA firm should critically analyze whether it really needs to provide payment assistance and if doing so increases the firm’s risk beyond its comfort level.
If the answer is yes, and the firm is willing to accept the risk, consider the following:
Client acceptance
Not every client may be a good fit for these services. Initiating tax payments on behalf of clients should be the exception, not the rule.
Limit services to clients who understand and accept responsibility for their actions and inactions and have a proven pattern of providing timely, accurate information to you. While it may seem counterintuitive, clients who may appear to need the most help because they are never on time or struggled with payments before the EO may not accept their responsibilities and be quick to blame the CPA firm if something goes wrong.
Documentation and acceptance of responsibilities
The firm and client should execute a written agreement that outlines, in detail, the scope of the firm’s services related to payment assistance and the client’s responsibilities.
- Define which taxing agencies the firm will be initiating payments to
- Address the client’s responsibilities including:
- Ensure the accuracy of bank account information provided;
- Approve payment amount and date prior to each payment; and
- Ensure availability of funds before payments draft.
- Limit the CPA firm’s liability to late payment penalties only.
Alternatively, a separate section could be added to the engagement letter to address making tax payments for clients.
Operational controls
Implement procedures at the CPA firm to help reduce the risk of an error associated with payment assistance. For example:
- Add each payment that will be made as an individual item in your workflow management system to help reduce the possibility of a missed payment.
- Determine and document the method(s) the firm will use to initiate payments for each client. If different methods will be used for different clients, document why the chosen method was selected.
- Establish a review process for payment accuracy.
- In advance of each payment, obtain written client approval of the upcoming payment date and amount, routing and bank account numbers as well as the client’s responsibility to maintain sufficient funds.
- Document all communications with the client and approvals with the firm.
To help mitigate the risk and impact of employee theft or data security incident consider the following:
- Perform background checks on personnel with access to bank account data.
- Segregate responsibility for payment initiation and payment review.
- Implement appropriate data security controls and procedures to help protect confidential client information.
- Maintain employee dishonesty and cyber liability insurance to help address the costs of employee theft or a data security incident.
Termination procedures
If a client relationship ends prematurely, the client may not realize they need to initiate future payments. Therefore, include the client’s responsibility for future electronic remittance of estimated tax payments as an item for client follow-up in the termination letter.
Summary
While the EO changes the playing field for making payments to the IRS, risks associated with the change can be managed through proactive communication with clients. If the firm decides to assist select clients in initiating payments, additional protocols should be established to help reduce the risk of a professional liability claim.
Additional Resources
For more information about this article, contact [email protected].
Appendix A: Client Notification Template
[Date]
Subject: Important Update – Executive Order 14247, Modernizing Payments To and From America's Bank Account and impact to tax payment and refunds
Dear [Client Name]:
Executive Order 14247, Modernizing Payments To and From America's Bank Account was signed on March 25, 2025, and aims to phase out all paper-based payments to and from the Federal government, including the Internal Revenue Service (“IRS”.)
Consequently, effective September 30, 2025, all refund payments from the IRS will be made electronically, to the extent permitted by law. All tax payments to the IRS are to be made electronically as soon as practicable. Failure to utilize an acceptable payment method may result in late tax payments and related penalties or interest.
It is recommended that you prepare for the transition to electronic payments by identifying, evaluating, and selecting an electronic payment method that is appropriate for you. Information on available payment options is available at https://www.irs.gov/payments and include, but are not limited to:
- Pay from your bank account;
- Pay by debit card, credit card, or digital wallet;
- Pay from your IRS account; and
- Other payment methods including same day wire, check or money order, cash or electronic funds withdrawal.
The IRS encourages the use of electronic payment options to help avoid delays.
Please ensure you are prepared to make all required payments electronically. For more information, read the IRS News Release, Modernizing payments to and from America’s bank account.
Thank you,
[Firm Name]