Federal Tax Payments Made Easier: An Update for Exempt Organizations

The IRS has expanded Direct Pay to include exempt organizations, allowing for an alternative to the Electronic Federal Tax Payment System (EFTPS) that was previously the primary option available for making Form 990-PF and Form 990-T tax payments. This update offers a faster payment method for private foundations and other entities filing Forms 990‑PF or 990‑T.

Key Takeaways

• The IRS now allows exempt organizations to use Direct Pay for federal tax payments without enrolling in EFTPS.
• This option may benefit private foundations and other entities filing Forms 990‑PF or 990‑T, especially for one‑time or time‑sensitive payments.
• Direct Pay offers faster payment execution but has limitations compared to EFTPS, making payment method selection an important compliance decision.

IRS Expands to Direct Pay for Exempt Organizations

Direct Pay has been available for individual taxpayers for many years. The IRS recently broadened this service to exempt organizations to make federal tax payments directly from a U.S. bank account. The service is free and secure and allows for a less cumbersome option.

To use Direct Pay, visit the IRS website: IRS’s Direct Pay System.

Why this matters:

• Reduces setup time and administrative hurdles
• Provides an alternative to wires or advance registration
• Expands flexibility for entities with infrequent payment needs

This update is particularly relevant for private foundations and other exempt entities filing Forms 990‑PF or 990‑T.

When IRS Direct Pay May Make Sense for Exempt Organizations

Direct Pay may be a practical option for organizations that:

• Make infrequent or one‑time federal tax payments
• Need to submit a payment on short notice
• Avoid advance enrollment requirements that require an activation PIN that arrives by mail

Key advantages of Direct Pay:

• No advance registration
• No sign-in required
• Immediate payment confirmation for documentation purposes

Limitations of IRS Direct Pay Compared to EFTPS

Although Direct Pay provides a convenient alternative for making payments, it is not intended to replace EFTPS in all circumstances.

Potential trade‑offs include:

• Payments subject to 5 transactions per day
• Limited payment history

Organizations with ongoing payment obligations or multiple tax requirements may still benefit from EFTPS’s broader account management features.

IRS Direct Pay vs. EFTPS for Exempt Organizations

Feature	Direct Pay	EFTPS
Enrollment required	No	Yes
Best suited for	One-time payments or infrequent payments	Recurring payments
Payment history & reporting	Limited	Robust
Administrative setup	Minimal	More structured

How We Can Help: Advisory Support for Federal Tax Payments and Exempt Organization Compliance

Navigating federal tax payment options is just one component of effective compliance and tax planning for exempt organizations. We work with private foundations and other exempt entities to:

• Determine required federal and applicable state tax liabilities
• Provide guidance related to payment methods and execution
• Evaluate tax planning opportunities

As requirements and IRS systems continue to evolve, Frank, Rimerman works closely with exempt organizations to assess practical implications and integrate changes into their tax processes with confidence.

Contact us to speak with our private foundation tax professionals to discuss which approach makes sense for your organization.