APRIL 2004

Plastic for Taxes

Paying your income tax bill via credit card is becoming increasingly popular in the U.S. According to the Internal Revenue Service, during the 2003 tax-filing season, 559,600 people paid their federal income taxes by credit card, up 79% from 2002. In addition, 672,507 people paid with a debit card, up 48% from 2002. The American Banker reported that about 2% of all taxpayers who have additional taxes due pay with a credit card. This percentage could eventually reach 10% according to Jim Weaver, the CEO of Tier Technologies, Inc. (Walnut Creek, CA). His company is one of three payment processors licensed to accept tax payments. He told the American Banker, "The IRS has an objective to grow electronic filing, and we think there is a lot of room for growth before it levels off." Taxpayers who pay by credit card incur an additional charge of 2.49% of the total tax bill because government regulations prevent the IRS from paying interchange fees as card-accepting merchants normally do.