I Tried to Pay My Taxes in Cash – Here’s What Happened, and Why the IRS Should Make It Easier To Do So

Yves here. I must confess to being fond of shaggy dog “Resisting the bureaucracy by exercising your rights” stories. Here, there is a real point to this exercise, since for the unbanked, paying for taxes using currency saves all sort of fees (although there is a tax on time).

I can imagine that other organizations, like hospitals, go on tilt if you try to settle up in cash. Readers?

By Jay L. Zagorsky, Clinical Associate Professor, Boston University. Originally published at The Conversation

About two-thirds of all U.S. residents who file federal income taxes typically get a refund. Unfortunately, this year I am among the other third who owe the Internal Revenue Service money.

So I tried something I’ve never done before and few people do: I wanted to pay my tax bill in cash – that is, with real paper currency.

In our nearly cashless society, this might sound like a hassle.

Why Pay Taxes in Cash

For one thing, I’m an economist writing a book explaining the advantages of using cash, and I was simply curious what might happen.

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.

I also wondered how difficult it is for the unbanked to pay taxes. Federal Deposit Insurance Corp. data shows about 6 million households have no connection to the formal banking system.

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.

Following the instructions, I completed my taxes early and learned I owed a bit more than US$1,000. Then I called on the phone to schedule a face-to-face appointment with the IRS to see when and where I could pay.

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.

Alternative Ways to Pay ‘In Cash’

For example, the IRS suggests cash payers can “Buy a prepaid credit card and pay online.”

This sounds easy but turns out to be costly. For example, Walmart, one of the largest U.S. retailers, offers a reloadable basic debit card. The card costs $1 to buy, $6 per month in fees and $3 to load with cash. Once the card is loaded with money, the businesses the IRS uses to accept debit card payments chargearound $2.50 for each payment, with payments limited to two per year.

The IRS also has partnered with national chains like CVS, Walgreens, 7-Eleven and Family Dollar to accept cash on its behalf. Their service fees are less, either $1.50 or $2.50 per payment. However, the steps needed to navigate the online program before you can show up at a retailer seemed almost as difficult as filling in the tax forms.

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 over $6,000.

Or, I could use a credit or debit card, but these methods charged around 2.5% more for the convenience.

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 were 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.

My goal was not to cause pain like the Virginia man who used 300,000 coins to pay his motor vehicle bill or the California man who pushed in wheelbarrows filled with $1 coins to pay his $13,000 property tax bill. Nor was I interested in recreating the famous but fictional British case of Board of Inland Revenue v. Haddock, in which Haddock tried paying his tax bill by writing a check on the side of a cow. Although it never happened, the case is still cited in legal circles.

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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  1. The Rev Kev

    ‘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.’

    I have read that that is the main way to tell you if a currency was a valid one or a bogus one. If you can pay your taxes to your government in that currency, then it is valid.

    1. Angie Neer

      Indeed, isn’t one of the fundamental principles of MMT that fiat currency gets its value from the requirement it be used for paying taxes?

  2. Joe Well

    My concern with paying in cash is that I have no proof, other than the receipt the recipient gave me, that I paid. Is this baseless paranoia?

    As an aside: that’s a possible argument for CBDC. Indeed, I don’t see why we’re not all clamoring to have our direct lines to the Fed like the banks do.

    1. ambrit

      Clamour all we want, the Feds will require us to use “officially approved” intermediaries to pay electronically. Neo-liberalism is predicated upon graft as a basic component of the social system’s functioning. The control of that graft is how the Feds “control” the society at large. Consider it a form of “soft” exclusive violence.
      We won’t get into the Panopticon issues involved with a universal Digital Currency today.

        1. ambrit

          Excellent catch, and therein lies the essential dysfunction of “magical thinking.” Basically, to retain one’s “official” status in ‘Moderne Society,’ one must, like the Queen in “Alice in Wonderland,” believe impossible things. To wit:
          Alice laughed. `There’s no use trying,’ she said: `one CAN’T believe impossible things.’
          `I daresay you haven’t had much practice,’ said the Queen. `When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast. There goes the shawl again!’
          Here, the Queen is a perfect representative of a dominant social group, practicing ‘magical thinking’ as a matter of course. Today, we suffer the tender ministrations of the descendants of that earlier dominant social elite. Things may Go South, but the ruling elites will never admit error or deficiency of any sort. It will always be someone else’s fault. Terran human nature, eternal and immutable.
          Stay safe. Keep those candles handy. We might end up like the final image from the film “Mad Max Beyond Thunderdome.”
          See: https://www.youtube.com/watch?v=wkXwcntEfvM
          The names have changed but the game stays the same.

  3. Joe Well

    Curious why the term “money order” is nowhere mentioned here. Granted, they’re not free, but sound cheaper than those prepaid cards.

    1. Louis Fyne

      in my opinion, the IRS people genuinely (in good faith) did not think about because their HQ-authorized script did not mention it.

      Your “rights” are only as good to the extent the rank and file employees know how to accomodate your rights.

  4. cfraenkel

    For what it’s worth, Canada Revenue lets you pay at your bank, so cash would be fine. To be fair – the bank certainly doesn’t send the cash to CRA : ) I don’t know if you can do this without an account – I doubt it, the verifying identity issues for the bank would be too difficult.

  5. flora

    “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.”

    Ah, the grift. It’s everywhere. My state put it food stamp benefits on prepaid cc, with a $25 spending limit per grocery visit. The Wall St. bank issuing the cc gets a transaction fee on every food purchase, and the transaction fee comes out of the remaining monthly value on the food stamp cc. Because of the $25 spending limit per store trip (and you can barely buy one sack of groceries for $25) the cc bank takes as much as 5 – 10% of the value of a monthly food stamp cc. Sweet deal for the banks… that donate to the politicians… that design the state safety net programs….

    1. LarryMotuz

      Grift, fer sher! Such limits are unconscionable!

      Just wondering what State does that and if you know of other States that also do that?

      1. Tom Doak

        I don’t think Michigan has a limit this low, but I have been behind people many times who are paying with a WIC card, and the process for them is onerous and demeaning. One might be tempted to believe it’s designed to be just that.

  6. GeoCrackr

    Related story: we own some property that’s behind (sole access) but not part of a gated HOA, the travel-rights being secured by contract attached to the deed requiring payment of an annual $50 gate fee. A couple years ago the board decided to cede management functions to an HOA management company. Predictably, last year after paying our gate fee in cash at the HOA office like usual, we started getting late fee notices from the management company claiming non-payment (regardless of the fact that since we were not members of the HOA we were not subject to their policies). We had to call them after each notice to explain that yes, we had paid at the HOA office, and yes, we had a receipt, until it finally came out that the reason they didn’t record the payment is b/c the management company didn’t accept cash payments.
    In the end we were forced to drop off a check at the HOA office and get the cash refunded, and directed the office manager to sort out the late payment fee issue with the management company (which, as of this writing, it seems she did).

    1. TMoney

      Waiting for the court case where the cash is refused and the “debtor” is taken to court with the cash in hand, and when asked about repayment waves said legal tender with the comment “take my bloody money” . It does say good for ALL debts public and private.

  7. Phelan

    Use it or lose it. Thank you Yves.

    As to Covid and bacteria on money as a bullshit excuse to get rid of cash, zap paper money in a microwave for 15 seconds and everything is dead. Same thing for articles of clothing like hats or shirts NO METAL on them. Lice, fleas, bacteria, viruses all gone.

    1. Wukchumni

      In a small, windowless room in the bowels of the Westin St. Francis hotel on Union Square, Rob Holsen washes the hotel’s money.

      Every penny, nickel, dime and quarter.

      Three times a week, Holsen soaps, rinses, dries and rolls money. He estimates that $1.5 million in spare change has passed through his hands in the past 20 years.

      “That’s a lot of pieces of money,” Holsen said as he began a recent cleaning.

      Since 1938, all the coins the St. Francis acquires through its cafe, restaurants and bars – all of it tarnished by the grime of the outside world – has made its way through the cleaning closet before it leaves the hotel bright and shiny.

      It’s believed the St. Francis is the only hotel to continue the practice, which started in the 1930s as a courtesy to guests.


  8. Louis Fyne

    “I must confess to being fond of shaggy dog “Resisting the bureaucracy by exercising your rights” stories”

    I salute the professor to potentially getting a “paid with cash” flag on his IRS file. For the professor, no big deal as his income is all/largely reported via a W2.

    If you are the owner of a cash-heavy business (quick serve food, strip club, etc), do not try this at home, lol.

  9. Wukchumni

    I’ll admit to sheepishly pulling out a quite slim rectangle made of plastic when confronted a few times in the War On Cash @ ski resorts and restaurants, and felt ok with it, and it isn’t as if I ever pay cash for gas or groceries either.

    Cash is what, like 4% of all transactions now, I wonder what percentage of that is in the one regulated ‘Cash Only’ industry?

  10. Daryl

    > I can imagine that other organizations, like hospitals, go on tilt if you try to settle up in cash. Readers?

    Paying with pennies sounds like an enjoyable “malicious compliance” exercise for some of those bills, if I’m being honest.

    1. Louis Fyne

      i am geuninely curious about the case law about that.

      (IIRC) you can’t pay parking tickets with a bucket of pennies, but if those pennies are pre-rolled, the state has to take it if they accept cash.

    2. Jennifer

      I pay co-pays in cash at the Cleveland Clinic. Usually the person has to get help from someone to figure out how to do it in the software. Sometimes it takes a long time for them to get the software to allow them to record the payment. I’m actually surprised that no one has given me a particularly hard time about it.

  11. Pat

    Sounds like another reason to have a postal bank.

    Of course being logical, and consumer friendly, means an ice cube has a better chance of making it through hell to this happen.

    1. Wukchumni

      Fund fact:

      You can cash a USPS money order at any post office for semollians, long green, etc.

      1. chuck roast

        Yeah, when he was annoying the ruling class I sent Bernie a couple of USPS money orders with bogus return addresses so he wouldn’t bother me. Did he cash them? Who knows.

  12. Bart Hansen

    The Walmart card allows just two payments per year. For those who need to remit estimated payments four times a year this will mean yet another charge.

    We only had to do that once. I wonder what the amount owed threshold is today.

  13. Savita

    In Australia the Bills of Exchange Act 1909 is the principal Act, as it is for all Commonwealth countries. It’s virtually a carbon copy of Englands of a few decades earlier. The relevant parts refer to payment, acceptance, delivery, liability.


    The second most principal act is the Constitution. It says only gold and silver coin is valid to pay debts.

    One practical application of this:
    Road tolls are electronic and don’t accept cash. Some have successfully upheld their right to travel and not pay road tolls based on the Constitution stating only cash is valid.
    In practice, they were sent fines.The fines were ignored. Upon written arguments quoting the commonwealth constitution, the toll companies eventually stopped sending the drivers fine notices. The drivers simply continued driving as usual. This has been in the media.

    The Currency Act of 1968 also defines money as legal tender. Here is one short section about how to use coins but you can go forwards and backwards through the document


    So, there are a few places to look in Australia for upholding use of cash at law.

    I personally witnessed someone discharging a liability to the australian tax office to the value of well over AUD$100,000.00 using a bill of exchange or promissory note. Outstanding debt zeroed just as if cash was used. Doing so is entirely upheld by the Bills of Exchange Act if referred to correctly.

    Lord Denning in the matter of Fielding & Platt Ltd v Najjar [1969] 2 All ER 150 at 152 (UK CA) stated:

    ‘We have repeatedly said in this court that a Bill of Exchange or a Promissory Note is
    to be treated as cash. It is to be honoured unless there is some good reason to the

  14. Hepativore

    If the US did automatic filing for all of its citizens like Japan and other countries do, a lot of this hassle could be avoided…as you would only need to file if you disagreed with the assessment of taxes that were withheld out of your yearly income. After all, the IRS has to check everybody’s tax returns for errors, anyhow.

  15. Tim

    “I can imagine that other organizations, like hospitals, go on tilt if you try to settle up in cash. Readers?”

    Well, in fairness to hospitals, they’d probably have to get a banking license and install a massive safe to deal with the mountains of cash they’d take in. /sarc

    $2000/admitted hour (excluding physicians) is the latest rate at my closest hospital.

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