The Internal Revenue Service introduced a new payment option in 2016 that lets individuals pay their taxes with cash at participating retail chains, but less than 700 payments have been made each year since the option was made available, according to a new report.
The report, from the Treasury Inspector General for Tax Administration, noted that through the partnerships established by the IRS, individual and business taxpayers can make a payment at more than 9,200 retail stores in 44 states. There’s no cost to the IRS to provide this option, but taxpayers are charged a fee of $3.99 per payment.
The cash option is available at participating PayNearMe payment locations (places like 7-Eleven and two other convenience store chains) in 44 states. PayNearMe is a private company that enables government agencies and businesses to accept cash payments remotely at retail stores.
The IRS began providing the cash option to make it easier for people without bank accounts to pay their taxes. According to the Federal Deposit Insurance Corporation, in 2017 there were 8.4 million households in the U.S. that had no checking or savings account, TIGTA noted. “Some of these unbanked households may need to pay their taxes with cash,” said the report. “In addition, some taxpayers with a checking or savings account may prefer to pay with cash. Previously, taxpayers could only pay with cash at a limited number of Taxpayer Assistance Centers.”
TIGTA decided to test the cash option for itself. Some of its own employees made cash payments at participating retailers and found that for the locations they visited, the payment option was user friendly and efficient. Taxpayers need to fill out an online application first, but TIGTA said it’s straightforward and requires information that’s readily available to the taxpayer, such as an address and date of birth.
TIGTA employees simulated the taxpayer experience by making 19 payments at 18 locations among the three participating retailers. The correspondence needed to make each payment was given to the taxpayer in a timely manner, and all payments were posted to online tax accounts on a timely basis.
Yet despite the usefulness of the program, relatively few tax payments have been made with cash at participating retail stores. Less than 700 payments have been made annually since the service was implemented.
While the number of taxpayers who would prefer to use such a service is unknown, TIGTA identified a number of reasons that could contribute to the low participation rate. First, the payment process requires taxpayers to scan a barcode at a participating retail store within seven calendar days of the bar code being issued. If it’s not scanned within these seven days, the bar code expires and a new bar code needs to be issued before a payment can be made. In 2018, more than 80 percent of the bar codes that the IRS issued expired. Second, the IRS doesn’t routinely advertise or promote the cash payment option, so most taxpayers are unaware the option even exists. Finally, while the external partnership increased the number of locations where taxpayers can pay with cash, TIGTA noted that geographic coverage could be improved. For instance, Mississippi has the highest percentage of unbanked households, but it has no participating retailer that accepts cash for tax payments.
TIGTA recommended that the IRS consider working with its outside partners to add more retailers in underserved areas. It also suggested the IRS consider extending or eliminating the bar code expiration time frame to reduce the burden on taxpayers. The report also recommended that the IRS do more public outreach to increase taxpayer awareness of the cash payment option and update its internal guidance. The IRS agreed with two of the recommendations, but disagreed with the one about the bar codes, saying there’s not enough evidence to suggest that taxpayers are harmed under the current bar code policy.
An IRS official pointed out that there was an increase in popularity of the cash option last year. “The usage of our Cash Payment Option has been historically low since the inception of the program in March of 2016,” wrote Kenneth C. Corbin, commissioner of the IRS’s Wage and Investment Division, in response to the report. “However, we have seen increased use in 2019 with 675 payments processed and over $210,000 received as of Oct. 18, 2019m for an increase in volume of more than 14 percent and an increase of dollars of more than 11 percent. This is a specific population that may have a need to pay with cash.”