But beyond my own book-related interest in paying taxes in cash, I had other reasons for wanting to do so. For years while teaching students about money, I noted the front of every piece of U.S. currency declares: “This note is legal tender for all debts public and private.”
The statement seemed ironic since I couldn’t figure out how to pay income taxes, one of people’s most significant public debts, with currency.
The IRS does not publish data on the methods people use to pay their taxes, but several IRS employees I spoke with told me almost no one pays the IRS in cash.
How to pay in cash
The IRS certainly doesn’t make it easy to do so.
Recently, a student of mine pointed out where the instructions for paying the government with paper money are buried, so I gave it a try. The five-step set of instructions hinted that paying cash directly is a time-consuming process and that I needed to start a month or two before taxes are due.
The operator, who told me her name was “Ms. Johnson,” was cheerful and helpful — but tried her very best to dissuade me from paying in cash. She offered to walk me through the steps on the phone so that I could pay online and not have to come into my local IRS office.
More importantly, this program has a $500 per payment limit and a $1,000 maximum amount accepted per year. This made the method impractical for me and for most people who owe the IRS money. The latest IRS figures show people who owe income taxes on average pay more than $6,000.
After I declined all of Ms. Johnson’s alternative payment offers, she told me I was lucky. There was an appointment available at the downtown Boston taxpayer assistance center in a few days. Her schedule showed many other centers around the country were booked until May, long after taxes are due.
An arduous process – but a successful one
I had cash at home, but not enough. I went to the bank and made sure I got exact change in crisp new bills to make the transaction as easy as possible.
I made it to the IRS building, went through airport-style screening and checked in on time. The receptionist was polite and again told me all the ways to pay without cash. After I declined, he asked me to take a seat in the waiting area filled with people clutching paperwork. As I walked away, the receptionist did a facepalm while shaking his head, which was not a positive sign.
After a 30-minute wait, another polite IRS worker came out and told me they could not accept cash that day because no courier was scheduled. Current IRS rules require that a courier take all cash immediately to the bank because they said “holding cash was not safe.” This is surprising given the federal office building was swarming with armed guards and required screening to enter.
I came back a week later when another cash payer was showing up. This time I had more success. It took 30 minutes, but after completing a multipart carbon form by hand, I got a receipt that said my taxes were paid.
A simple solution
Paying the IRS with cash is possible, but it turned out to be onerous and time-consuming.
I believe there is a simple solution. The Code of Federal Regulations, which governs the IRS and other agencies, allows authorized banks to accept tax payments. The law doesn’t specify payment only by check or other methods. This means if procedures existed, taxpayers could walk into major banks, hand the teller cash and have the bank inform the IRS of the amount paid.
For people without bank accounts, their only option for paying taxes shouldn’t require paying fees to credit card processors or retailers – especially since they are likely among the poorest taxpayers.
If the government wants everyone to pay their taxes, why doesn’t it make it as easy as possible?
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Jay L. Zagorsky teaches at Boston University's Questrom School of Business. From 1988 to the present his teaching has spanned a wide range of levels from senior executives taking intensive classes to high school students encountering economic theories for the first time. From 1995 to 2018, he held the position of research scientist at The Ohio State University, where he collected data as part of the National Longitudinal Surveys on income, wealth, and life experiences of thousands of Americans.