Update 11/19/22: ACI is now sending out $10 compensation to Paypal accounts which made a payment when there was a cash advance issue to compensate for any fees. Interestingly, some people who never got hit with any fees still got the $10 credit. (ht nurglefish)
Update 11/1/22: Two readers (1, 2) heard from Paypal that this issue has been fixed. We need corroborating data points of recent payments to that effect.
Original Post:
Multiple reports from the past month indicate that federal tax payments processed via ACI Payments using Paypal as the payment method will trigger a cash advance fee. While the tax payment itself will not be considered a cash advance, the fee – charged separately – is erroneously being considered as a cash advance. You’ll get hit with a cash advance fee and begin paying interest immediately.
A lot of people are getting hit by this now with Paypal being the Chase Freedom Q4 category. ACI and all other IRS-approved payment processors clearly state that no cash advance fee will be charged (ACI link). Yet with the (new-ish) Paypal payment option the service fee is erroneously being considered by the banks as a cash advance. (1, 2, 3)
You can instead use the payUSAtax processor who also allows Paypal as a payment option and has a slightly lower fee (see this comment). I haven’t yet heard of any reports of a cash advance issue when using payUSAtax. Please let us know if you have recent experience – positive or negative – when using Paypal via payUSAtax.
Hat tip to reader Harold
