Please be aware of this! It is low-hanging fruit for the scammers.

This is NOT an Alert issued by the IRS or any tax agency. We feel the potential for scams against taxpayers warrants a pro-active announcement.

The IRS has rolled-out a new Cash Payment Option to allow taxpayers to pay their tax obligations in cash. Naturally, this is being touted as a convenience to the taxpayer, but it's opening the doors to even more scams, identity theft and financial attacks. Please beware.

In short, this process involves an online application, email and/or text messages between the taxpayer, the IRS and a service provider known as OfficialPayments.com or PayNearMe, and finally, payment is made at a participating 7-11 store in 34 states. Of course, there is a fee for this convenience, albeit a small one. (As of this writing, the fee is $3.99 per payment transaction.)

To be frank, this idea is dubious on many levels.

Low-Hanging Fruit

With the end of the year upon us and tax season close on its heels, we are very likely to see scams of all sorts trying to take advantage of this new convenience. It is a complicated procedure that the average taxpayer is unlikely to be familiar with or understand.

The process starts by the taxpayer visiting the PayNearMe website. Please note: although this site displays the IRS logo, it is a third-party site – they have been authorized by the IRS, but they are not the IRS. The taxpayer then provides information necessary for the IRS to verify identity and amount owed. It will take the IRS two to three days to verify the information, after which the taxpayer will receive an email or text message from PayNearMe. This message will include instructions and a payment code. Finally, the taxpayer goes to a participating 7-11 store to make payment and receive a receipt. The payment will typically take two days to be posted to the taxpayer's account.

As you can see, this procedure is not quick – it will take at least 4 to 5 days for payment to be applied to the taxpayer's account, assuming there is no glitch in the system. It is this delay and the complicated system of emails / text messages that adds confusion to this payment option. It is that confusion that the scammers will be exploiting.

To make matters worse, demographically speaking, this option is most likely to appeal to lower-income taxpayers, taxpayers for whom English is not their primary language and other vulnerable groups. The bad guys know this and are chomping at the bit.

It is a tempting target for the scammers!

What to Know

According to the IRS's website, "Taxpayers will only receive an email from OfficialPayments.com or PayNearMe if they have initiated the payment process." This is important! Neither the IRS, PayNearMe nor any other third-party should initiate this process with you!

If you receive an unsolicited, unexpected email or text message purporting to be from the IRS or anyone related to the Cash Payment Option:

  1. DO NOT RESPOND!
  2. Recognize that this is a scam!
  3. Contact a qualified tax professional or the IRS for guidance.
  4. Report any such phishing schemes to phishing@irs.gov

Our Recommendation

There are too many outside players involved, it's ripe for scammers, there are better alternatives and the risk is too great ... stay away from this option!

Frankly, the convoluted process and the time delay make this a less attractive option. The taxpayer will need to save the receipt received from 7-11 in the event the payment isn't properly applied to his account. Without that receipt, the taxpayer will have no evidence if the IRS should question payment.

Although this is being touted as a convenience to the taxpayer, recognize that this is really a convenience for the IRS - another way to collect money. There is nothing inherently wrong with that – smart businesses do it all the time. But, as I hope you can see, this really isn't more inconvenient for the taxpayer at all.

There are better alternatives. For our clients, each tax return that requires a payment includes instructions for alternate payment methods. Also, the IRS offers additional payment options on its website at IRS Payment Options.

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