Yet another reason we can't believe the government.
The Fed wants us to use less plastic, the IRS want us to use more.
AUGUST 21, 01:37 EDT
Credit Cards Can Pay U.S. Tax Bills
By CURT ANDERSON
AP Tax Writer
WASHINGTON (AP) - Beginning next year, the
federal government will accept credit cards for
Americans' income tax bills.
Although taxpayers will be charged a
yet-to-be-determined ''convenience fee'' for the
privilege, the Internal Revenue Service hopes the move
will encourage more people to file returns
electronically. About 24.5 million did so this year.
''Our responsibility, we believe, is to give folks the
widest possible array of payment options,'' said Steve
Holden, the national electronic program director at the
IRS. ''Many consumers will find it convenient to use
their credit cards.''
One major question is whether Visa International -
the world's largest credit card issuer - will get on
board. Company officials there will decide this fall
whether to give the program a try.
Under the plan, taxpayers next year will be able to
pay IRS bills two ways with credit cards:
-Holders of MasterCard, American Express, Discover
- and possibly Visa - cards will be able to charge
their balances due by calling a toll-free number. It
won't matter whether the tax returns are done
manually, through a paid preparer, or electronically.
This phone system is being run by US Audiotex of
San Ramon, Calif.
-Holders of Discover or Private Issue cards issued by
Novus Services Inc., using Intuit's popular TurboTax or
MacInTax preparation software, will be able to
complete and file their returns and pay their taxes
using personal computers.
In both cases, taxpayers will be charged fees for the
service based on the size of their tax bills. Officials at
Audiotex and Novus said they have not determined
how much the fees will be or how they will be
calculated.
But one factor in how those fees are determined is
whether Visa will join the other card issuers on the
Audiotex system.
Visa, with about 600 million cards in circulation, wants
taxpayers to be charged a flat fee rather than a fee
based on the tax bill - an arrangement Audiotex
believes would cost it money, said Steve Johnson,
Audiotex senior vice president.
Visa officials did not immediately return calls seeking
comment Thursday. Johnson, however, said the
company's board of directors is likely to vote in
October on whether to try the program.
Many believe Visa, which has about half the U.S.
credit card business, will find it difficult to ignore such
a potentially huge market.
''There's too many chips on the table for them not to
do it,'' said Frank O'Leary, treasurer in Arlington
County, Va., which had the first credit-card taxpaying
system in the country.
The IRS previously was hamstrung in setting up such
a payment system for federal tax bills because of the
issue of fees that merchants normally pay to credit
card issuers.
In the 1997 tax reform law, Congress said the federal
government should not pay such fees, which forced
the IRS to implement the floating-scale plan that shifts
the fees to taxpayers.
In Arlington County, the credit-card system has proved
popular for paying property and personal taxes,
O'Leary said. About 10 percent of the suburban
county's taxpayers used credit cards in 1997, the
plan's first full operational year.
For tax collectors, less paper is cheaper. Credit card
transfers occur much more quickly and reduce the
need for extended business hours or extra personnel
to process thousands of last-minute returns.
Also, it won't matter if a tax deadline falls on a
weekend.
Some experts worry that taxpayers who already have
steep credit-card debt might neglect to save for their
tax bills and simply use the credit method, digging
their financial hole deeper.
Taxpayers who can't pay their bills up front now must
request an installment arrangement with the IRS,
subject to heavy penalties and interest if they fail to
keep up.
''Money management is a big issue. It's clearly not for
everyone,'' said Johnson of Audiotex. ''It's for people
who see this as an alternative.''
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