April 06, 2005 10:58 ET

Paying Taxes by Credit Card Remains Stagnant

American taxpayers frightened by fees, continue resistance for second year of Ipsos-Insight survey Attention: Business/Financial Editor, News Editor NEW YORK, NY --(CCNMatthews - April 6, 2005) - American taxpayers are still hesitant to embrace the option to pay Uncle Sam with their credit cards, according to a study of 1,001 American adults conducted by leading market research firm Ipsos-Insight. The study revealed for the second year that while 62% of American adults are aware that the Internal Revenue Service accepts credit cards, a paltry 1% plan to use a credit card to pay incremental Federal income taxes for 2004.
"As was apparent in previous years, a large convenience charge aimed directly at the consumer is clearly the barrier to broader use of this service," said Doug Cottings, Senior Vice President with Ipsos-Insight's Financial Services practice.

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 merchants usually pay credit card companies to process their transactions. The convenience fee acts as a necessary revenue stream and is split between the service provider and the credit card company in exchange for the time it takes them to handle and process these transactions.

Cottings added: "The heavy convenience fees being charged directly to the consumer negate the attraction to credit card benefits such as rewards points or payment deferrals. This negative outcome has effectively destroyed the effort to broaden taxpayer's payment options through credit card payments."

According to the study, Americans are extremely resistant to paying the convenience fees. Three out of four (75%) 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 (3%) or direct debit from a bank account (15%).

The study reveals that if the service were free, 21% of those open to the concept would use it, down from 34% last year. This sends the signal that the convenience and loyalty benefits of using a credit card are appealing, just not for a premium.

"When a majority of consumers are trying to reduce their tax bill, a premium for a credit card service is not attractive. Any additional expenses to their taxes is the breaking point at which most people are turning away from the option," continued Cottings.

This year, 16% of Americans who owe or plan to owe federal income taxes expect to pony up an average of $1,200 to Uncle Sam on April 15-an attractive sum to credit card companies.

Market exists, but fee issue must be addressed

For the second year running, the Ipsos-Insight survey revealed that awareness of credit card payments for federal income tax purposes remained static while the percentage of potential users declined. This shows that there is a potential market for income tax payments with credit cards, but the issue of convenience fees must be addressed.

"To enable this system to work, the IRS in conjunction with the credit card companies need to find a way to reduce fees aimed at taxpayers. If the IRS is seriously considering credit cards to be a tangible payment option they will find a way to pay the credit card companies the processing fee, just like the millions of other merchants worldwide. Otherwise, the long term viability of this option is at risk, as credit card companies may pull out of the program," concluded Cottings.


Data were gathered using the Ipsos U.S. Express omnibus survey from April 1-3, 2005. Interviews were conducted via telephone among a nationally representative U.S. sample of 1,001 adults aged 18 and older. The margin of error is +/- 3.1%.

For more information, please contact:

Doug Cottings
Senior Vice President
Ipsos-Insight, Financial Services
(336) 668-8340

About Ipsos-Insight

Ipsos-Insight, the flagship marketing research division of Ipsos in the U.S., specializes in research for companies in the following industries: agrifood; cable, media and entertainment; consumer packaged goods; energy and utilities; financial services; health; lottery and gaming; retail; and technology and communications. Ipsos-Insight provides custom and tracking research services to domestic clients, as well as U.S.-based multinationals. It offers concept and product testing, package testing, attitude and usage studies, omnibuses, tracking systems, brand equity, volume forecasting, marketing models, advanced analytics, and global research. Ipsos-Insight is an Ipsos company, a leading global survey-based market research group.

To learn more, visit: www.ipsos-insight.com.

About Ipsos

Ipsos is a leading global survey-based market research company, owned and managed by research professionals. Ipsos helps interpret, simulate, and anticipate the needs and reactions of consumers, customers, and citizens around the world.

Member companies assess market potential and interpret market trends. They develop and build brands. They help clients build long-term relationships with their customers. They test advertising and study audience responses to various media. They measure public opinion around the globe.

Ipsos member companies offer expertise in advertising, customer loyalty, marketing, media, and public affairs research, as well as forecasting and modeling and consulting. Ipsos has a full line of custom, syndicated, omnibus, panel, and online research products and services, guided by industry experts and bolstered by advanced analytics and methodologies. The company was founded in 1975 and has been publicly traded since 1999. In 2004, Ipsos generated global revenues of € 605.6 million ($752.8 million U.S.).

To learn more, visit: www.ipsos.com.

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Contact Information

  • Doug Cottings, Senior Vice President, Ipsos-Insight, Financial Services
    Primary Phone: 336-668-8340
    E-mail: doug.cottings@ipsos-na.com