Tier Announces IRS Says Credit and Debit Card Convenience Fees are Deductible for Some Individual Taxpayers Who Itemize

Tier Technologies, Inc. (NASDAQ:TIER) and Official Payments Corporation, its wholly-owned subsidiary, today announced that the Internal Revenue Service (IRS) has decided that the convenience fees charged for paying federal individual income taxes using a credit or debit card are deductible for some taxpayers who itemize. This decision is a change from prior policy.

The IRS had previously determined that only convenience fees incurred by business taxpayers can be deducted as a business expense.

In reassessing the position for individual taxpayers, the IRS decided that the convenience fees associated with the payment of individual federal taxes, including payment of estimated tax, can be included as a miscellaneous itemized deduction. However, only those miscellaneous expenses that exceeded 2 percent of the taxpayer’s adjusted gross income can be deducted.

Convenience fees are deductible in the tax year they occur. For example, fees charged to payments made during 2009 can be claimed on the 2009 return filed next year.

Since 1999, when Official Payments began processing federal tax payments for the IRS, the company has processed over $9.0 billion in federal taxes. Payments may be made securely with an American Express®, Discover® Network, MasterCard® or Visa® card or by calling 1-800-2PAY-TAXSM (1-800-272-9829) or visiting www.officialpayments.com.

Official Payments charges a convenience fee for this service. Taxpayers using credit and debit cards with bonus rewards programs may, depending on their card’s program, earn reward points, frequent flyer miles or money back for paying their taxes. Taxpayers are advised to check with their card issuer for details.

Not everyone who pays a convenience fee will be able to deduct them. Taxpayers first must be eligible to file a Form 1040 Schedule A to itemize their expenses. And, taxpayers must have enough miscellaneous expenses to exceed 2 percent of the taxpayer’s adjusted gross income. Miscellaneous expenses include but are not limited to items such as tax preparation costs, job search expenses and unreimbursed employee expenses.

Most individuals still pay their federal tax obligations by check, but last year more than 4 million taxpayers electronically paid their taxes according to the IRS.

Visit www.officialpayments.com for additional information.

About Tier Technologies, Inc.

Tier Technologies, Inc. provides federal, state and local government and other public sector clients with electronic payments solutions and other transaction processing services. Headquartered in Reston, Virginia, Tier Technologies serves over 3,300 electronic payments clients throughout the United States, including federal, state, and local governments, educational institutions, utilities and commercial clients. Through its subsidiary, Official Payments, Tier delivers payments solutions for a wide range of markets. For more information, see www.tier.com and www.officialpayments.com.

Statements made in this press release that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Tier undertakes no obligation to update any such forward-looking statements. Each of these statements is made as of the date hereof based only on current information and expectations that are inherently subject to change and involve a number of risks and uncertainties. Actual events or results may differ materially from those projected in any of such statements due to various factors, including, but not limited to: the impact of governmental investigations; the potential loss of funding by clients, including due to government budget shortfalls or revisions to mandated statutes; the timing, initiation, completion, renewal, extension or early termination of client projects; the Company's ability to realize revenues from its business development opportunities; the timing and completion of the divestment of the Company's non-core assets; and unanticipated claims as a result of project performance, including due to the failure of software providers or subcontractors to satisfactorily complete engagements. For a discussion of these and other factors which may cause our actual events or results to differ from those projected, please refer to the Company's quarterly report on Form 10-Q for the quarter ended December 31, 2008 filed with the SEC.