Any check over $100 million sent to the U.S. Internal Revenue Service will be sent back to the sender. The IRS is no longer accepting checks over $100 million after January 1, 2016, according to the release of the Internal Revenue Bulletin, Bulletin No. 2015-36. The reason for this new rule by the IRS is the U.S. Federal Reserve Bank doesn't handle the checks because most check processing equipment can't handle checks that large, the StarTribune reported.
The issue with the check processing equipment is, however, only an problem with manually processed checks. The Federal Reserve and the IRS would both prefer electronic or credit card transactions instead of physical checks, according to Forbes. And now that they have officially banned the use of checks larger than $100 million after 2016 begins, companies will have to find an electronic payment method with which they're comfortable.
Companies can pay the IRS via credit card in large amounts, but that will require specific authorization from the company's credit card company. They will have to follow specific instructions laid out by the IRS, and contact the Official Payments Corporation via phone.
The U.S. Treasury Department told StarTribune that checks of $100 million or higher have a higher risk of being improperly processed, stolen or subjected to fraud because they must be processed by hand. The electronic payment alternatives available to large businesses that need to pay the IRS in excess of $100 million should alleviate most concerns the Treasury Department has expressed about the manual check processing.
Continued progress towards electronic payment methods
According to Associate Press, 90 percent of Americans pay their taxes electronically, so this new rule will only affect around 10 percent of the population. However, the number of checks received by the Federal Reserve for amounts larger than $100 million rose to 14 last year. This was one of the reasons the IRS and the Federal Reserve chose to enact similar rules at about the same time. These rules will hopefully encourage the parties who wrote those 14 checks to utilize electronic payment methods in the future. Those people could just choose to write multiple checks for under $100 million dollars that would add up to the amount they owed the federal government. However, with electronic payment methods growing every year, it is possible they will elect to utilize an up-to-date method, such as a credit card or direct debit.