IRS to Start Accepting Credit Cards Next Year
For the first time, many Americans will be able to use credit cards to pay their tax bills to Uncle Sam next year.
The Internal Revenue Service hopes the ability to pay by credit card will encourage more people to file tax returns electronically, even though taxpayers also will be charged a fluctuating “convenience fee” to use credit cards.
And it’s still uncertain whether Visa International Inc.--the world’s largest credit card issuer--will get on board.
Still, the move announced Thursday is a big step forward for the IRS. It has been wrestling for years with how taxpayers could use their favorite plastic to pay their most despised bills. About 24.5 million taxpayers filed electronically 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.”
Beginning next year, taxpayers can 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 by the taxpayers manually or electronically, or through a paid preparer. 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 Inc.’s TurboTax or MacInTax software, will be able to complete and file their returns and pay their taxes using personal computers. Riverwoods, Ill.-based Novus is running this system.
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.
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By far the biggest remaining question is whether Visa will join other card companies on the Audiotex system.
San Francisco-based Visa, with about 600 million cards in circulation, wants the taxpayer charged a flat fee rather than a fee based on the tax bill--an arrangement that Audiotex believes would cost it money, said Steve Johnson, Audiotex senior vice president.
Visa officials did not immediately return calls seeking comment. Johnson, however, said the company is scheduled soon to decide whether to give the Audiotex plan a try.
The IRS previously was hamstrung in setting up such a payment system 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.
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New Ways to Pay
Beginning next year, taxpayers will have two ways to pay bills to the Internal Revenue Service with credit cards:
* By telephoning (888) 2PAY-TAX, holders of MasterCard, American Express, Discover and possibly Visa will be able to charge their balances due to the IRS. This method will work with any kind of filing, whether done by the taxpayers manually or electronically, or through paid preparers. This system is being run by US Audiotex of San Ramon, Calif. The toll-free number is currently used by Audiotex for people who file local or state taxes in some areas, and is not yet being used for federal taxes.
* By using Intuit Inc.’s popular TurboTax or MacInTax preparation software, holders of the Discover or Private Issue cards--both issued by Novus Services Inc. of Riverwoods, Ill., which is running this system--can fill out their returns and pay balances due while sitting at their home personal computers.
