January 15, 1999
Income Taxes Payable by Credit Card
WASHINGTON - A new payment option for federal income taxes
starts today -- put the balance due on a credit card. The Internal
Revenue Service is piloting two different ways for taxpayers to
charge their taxes owed -- by phone and by computer. Once they have
determined the amount owed, taxpayers may make a toll-free call to
1-888-2PAY-TAX and arrange payment of their 1998 taxes with a
MasterCard, Discover, or American Express card.
The computer option for paying by credit card is available only
for those using Intuit tax preparation software to file from home.
Under an arrangement between Intuit and Discover Card, e-filers will
be able to charge their balance due to a Discover Card brand card.
The payment information will be part of the electronic file they
send. This pilot will begin Feb. 28.
With either method, private sector companies will process the
credit card transactions and report the payment amounts -- but not
the credit card numbers -- to the IRS. Users will pay convenience
fees. The IRS is not involved in the setting or collection of such
fees. The law allowing tax payments by credit card prohibited the
government from paying fees to the credit card companies.
Although these credit card pilots were designed to complement
the paperless experience of e-filing, the pay-by-phone system is not
linked to the manner of filing. Thus, even those who file a paper
tax return may call the toll-free number to charge a tax payment.
Other payment alternatives for those who dont have the full
balance due when filing include obtaining a bank loan or setting up
an installment agreement with the IRS. There is a $43 user fee for
an installment agreement, plus interest and penalty charges on
unpaid balances. Taxpayers may use Form 9465 to request an
The law now gives taxpayers a right to an installment agreement
when they are unable to pay if the balance due is not more than
$10,000, the tax will be fully paid within three years, and, during
the previous five years, the taxpayer has not failed to either file
returns or pay taxes and has not had an installment agreement.
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