Paying Taxes By Credit Card Off To A Slow Start

The study reveals that while 63% of American adults are aware that the Internal Revenue Service accepts credit cards, only 1% plan to use a credit card to pay incremental Federal income taxes the next time they owe. Depending on the service provider, a credit card convenience fee of anywhere from 2.25% to 3% is charged to the taxpayer when paying federal taxes by credit card. The Taxpayer Relief Act of 1997 authorized the Treasury to accept credit card payments for federal taxes but prohibits the IRS from paying the standard credit card transaction fees merchant usually pay credit card companies to process their transactions. According to the study, Americans are extremely resistant to paying the convenience fees. Three out of four (76%) say they “definitely will not” use a credit card the next time they owe incremental Federal income taxes. Instead, they will resort to the usual personal check (70%), money order (12%) or direct debit from bank account (9%). The study reveals that if the service were free, 34% of taxpayers would use it, sending the signal that the convenience and loyalty benefits of using a credit card are appealing, just not for a premium. This year, 15% of Americans expect to pony up an average of $3,000 to Uncle Sam on April 15-an attractive sum to credit card companies.