IRS Will Accept Credit Card Payments
By Cindy Frailing

It has been long in coming, but the IRS has finally put in place a program where taxpayers will have the option of paying their taxes using their credit card. Beginning January 15, 1999, taxpayers who electronically file Form 1040 using an authorized IRS e-file provider, a commercial tax preparation software, or the IRS's TeleFile, can call 1(888)-2PAY-TAX on any touch-tone phone and make balance due payments. Intuit's TurboTax users can begin paying their taxes with NOVUS/Discover cards only, and not until after February 28, 1999. The pilot program is the IRS's response to a long-standing request from both individual taxpayers and tax practitioners to accept credit cards as a convenient method of paying taxes.

The IRS has implemented the pilot program by forming a partnership with private industry processors that allows taxpayers to pay balance due returns using MasterCard, American Express, NOVUS/Discover cards, and other NOVUS brand cards. It is possible that the IRS will accept other credit cards in the future and expand the option to the payment of other types of taxes. For now, the option is limited to federal income taxes reported on Form 1040.

The IRS is not a merchant, therefore not directly involved in the credit card transaction and will not have access to the credit card numbers. The IRS will rely on private processors to verify the validity of the card and line of credit. If necessary, the IRS will be able to construct an audit trail of any payment from credit card authorization to posting once the transaction is completed. The private processors will negotiate a convenience fee with the major credit card companies to cover their overhead costs. During the call, the taxpayer will be advised of the convenience fee and can cancel the transaction if they decide not to pay this way.

The way the payment option works, is once the return is completed and you have been notified that the IRS accepted it, you call 1-888-2PAY-TAX (1-888-272-9829). The voice response system will prompt you to enter your Social Security number. This enables the IRS to properly credit your tax payment to your account. Your Social Security number is re-entered as a confirmation. You then enter your credit card number, the expiration date, and the balance due on your return. The convenience fee will be announced and you are asked to confirm their approval of the amount. During this time you can decline payment using this option by simply hanging up the phone. If the approval is given, you will be given a confirmation number. Retain this number for your records in case questions arise later. The IRS has indicated that the date of authorization will be the date the tax is considered paid. Therefore, you must authorize payment by April 15, for it to be considered timely made.

The next credit card statement you receive after the authorization will contain two line items: United States Treasury Tax Payment for the amount of tax, and Tax Payment Convenience Fee for the fee charged by the private processor.

To curtail potential fraud, you will only be allowed to call and use this method of payment twice. This limits the convenience fees and prevents numerous unwanted charges to your card. Allowing use of this method of payment twice enables parents to charge their child's, or another dependent's tax liability using their card.

If you do not feel comfortable preparing your tax return on a computer or using TeleFile, you can seek the assistance of a tax professional who offers electronic filing and take advantage of this new method of paying your balance due. You can locate a professional tax practitioner in your area by accessing the National Association of Tax Practitioner's (NATP) member listing on the world wide web at, or by calling NATP at (800)558-3402, Ext. 3.