Dive Brief:

• The share of Americans planning to pay their annual income taxes by check has dropped from 21% last year to 18% this year, according to survey findings released Tuesday by payments firm ACI Worldwide. This year, Tax Day falls on April 18.
• Gen Z leads the charge, with their preference for check falling from 13% to 5%, followed by millennials (11% in 2021 to 8% in 2022) and Gen X (22% last year and 18% this year).
• "Digital and alternative methods of payment are more secure than paper-based payments, and taxpayers are seeking more digital options to pay their taxes," said Sanjay Gupta, ACI’s head of biller segment, in the news release.

Dive Insight:

The shift in paying for goods and services digitally and conducting more transactions via mobile devices means consumers have come to expect these payment options in more areas of their lives. ACI’s data indicates fewer taxpayers are opting to pay by check this tax season and more are exploring alternative methods like peer-to-peer payment apps.

It’s not surprising that digitally native Gen Z is least interested in paying income taxes by check (5%), while 30% of baby boomers still favor paying taxes this way. About 8% of millennials still prefer to pay by check, as do 18% of Gen Xers, per ACI.

The share of taxpayers planning to use a mobile phone to pay annual income taxes increased 27% between 2021 and 2022, ACI said, although the company would not share the percentages of consumers paying via mobile devices last year or this year.

Only 3% of taxpayers planned to use an alternative payment method like PayPal, Venmo, Apple Pay or Google Pay to pay their taxes; these options are likely to be more common among Gen Zers (6%) and millennials (5%) than older generations, ACI found. This was a new question on this year's survey.

Last year’s survey indicated 55% of taxpayers planned to pay using digital methods, either with credit or debit cards or electronic fund withdrawals, up from 50% in 2020. Only 26% planned to pay by check or cash last year, compared to 32% in 2020, and about 8 in 10 of those receiving a refund opted for direct deposit rather than a mailed check. 

ACI is one of the Internal Revenue Service’s payment processors and has processed some $25 billion in IRS tax payments. ACI recently expanded its mobile payment options for federal taxpayers, allowing them to make payments via PayPal and Venmo.

Block’s Cash App, which acquired Credit Karma Tax in 2020, has touted its Taxes offering, where users can file through the app and get their refund sooner if they opt to deposit it into the app. 

Amid the COVID-19 pandemic, more than half of taxpayers didn’t pay any federal income taxes in 2020 or 2021, attributed to factors like unemployment, government stimulus checks and tax credit programs, CNBC reported. That percentage is expected to fall to 42% for 2022.

Other findings from ACI’s survey: Compared to last year, credit card transactions are up 13% and debit card transactions increased 8%. The dollar value of card transactions grew 21% year-over-year. 

One-third of taxpayers have encountered tax scams, such as phone or email scams or ghost preparer scams, per ACI. Gen Z is most commonly targeted (11%) in ghost preparer scams, whereas Gen X is more often targeted by identity thieves. 

ACI polled 1,160 adults on their taxpaying plans in February.