By Eric and Joshua Preven
Special to the Palisades News
Those who didn’t pay the second installment of their L.A. County property taxes on time—the deadline was February 1—have until April 10, when at the stroke of 5:01pm, a ten percent penalty will snap shut on them like a trap. (Payments postmarked April 10 are OK.)
In L.A. County, property taxes can be paid with a credit or debit card, and many Angelenos for various reasons make use of that option, however fraught with costs and hidden risks it can sometimes be. L.A. County is not responsible for those risks and costs, but it is responsible for the fact that Angelenos who pay their property taxes with a credit or debit card are getting a lousy deal on processing fees.
The debit card situation is particularly bad.
If you pay a $6,000 tax bill to the County of Los Angeles using a debit card, you will get charged a processing fee of $135.
If you pay a $6,000 tax bill to the Internal Revenue Service using a debit card, you will get charged a processing fee of at most $2.59.
That means the County’s processing fee is fifty-two times higher than that of the IRS.
The spread widens as the size of the tax bill goes up. On a payment of ten thousand dollars, the County rate becomes eighty-seven times higher than its federal counterpart.
Neither the County nor the IRS keep any of the processing fees charged. Those go to third-party payment processors.
The devil is in the details of which payment processor is contracted with and on what terms. L.A. County has contracted with just one payment processor: Fidelity National Information Services (FIS), which charges a debit card fee equal to 2.25% of the tax payment.
By contrast, the IRS has contracted with three payment processors—all of which charge a flat debit card fee of less than $2.60.
If the IRS can negotiate its payment processors down to a low flat fee, why can’t L.A. County get the same deal from FIS?
FIS is a Fortune 500 company headquartered in Jacksonville, Fla. In 2017 it earned $1.31 billion . . . an increase of 78% over the previous year.
Slightly less egregious than FIS’ debit card fees are its credit card fees. Angelenos using a credit card to pay property taxes get charged by FIS a fee equal to 2.25% of their tax bill.
None of the IRS-approved payment processors charges more than 2%.
L.A. County’s credit card fee is 4% higher than that of Ventura County, and it’s a 7% increase over last year’s rate.
The increase was not voted on by the L.A. County Board of Supervisors. It just popped up one day in an announcement on the website of the County Treasurer and Tax Collector.
No rationale for the rate hike is given. The announcement states only that the increase is “primarily driven by the online third-party payment processor.” That processor, to refresh your memory, keeps all of the fees it charges.
Time to renegotiate.
In June, Eric Preven and Joshua Preven won the L.A. Press Club Award for Online Political Commentary. They can be followed on Twitter @PrevenReport or reached by email at ThePrevenReport@gmail.com.