Ok, so you are thinking about taxes and getting a tax bill, as well as the ways of paying them. Among your options, there’s the almighty credit card. But will the IRS accept it? Let’s take a few moments and discuss this aspect, shall we?
Long story short, the answer is “yes, you can do it”. However, there are a few aspects you should be aware of before doing this.
How to pay taxes with your credit card
Technically speaking, you have three options when it comes to paying taxes, as it follows:
- Through your bank account, free of charge
- Through a debit card, which involves a small fee, usually between $2 and $3.95
- Through a credit card, also with fees
And this is where there’s a real catch, as again, it is possible to pay taxes using a credit card, but some fees are involved. Specifically, we’re talking about an amount between 1.96% and 1.99% of the total you owe.
At first, this doesn’t sound that much, but if you owe large amounts of money, you can end up paying a pretty large sum.
It’s also worth mentioning that the IRS doesn’t accept payments made directly with debit or credit cards, so you will have to use one of the accepted third-party processing services – PayUSAtax, Pay1040, or ACI Payments – all of them charging a small fee for payments made through them.
In the end, it turns up that opting for a credit card to pay your taxes can be pretty expensive.
Is it worth paying taxes with a credit card?
The answer will probably annoy you but…it depends. It depends on the card, that is!
If you have a credit card that earns you more rewards than the fees you pay, then yes, you can give paying your taxes a shot. Let’s not forget that some cards pay up to 2.5% back in rewards. Presuming that you will pay around $10,000 in taxes, even with the 1.96% fee, you can still obtain $54 in rewards.
Besides this, if your plan is to obtain a new cardmember sign-up bonus, a good way of doing it is paying your taxes by credit card, as long as these are big enough to make you eligible for the bonus.
Finally, if you don’t have the money for your taxes, using a credit card can make sense, as long as you are able to obtain a card with no interest rate on purchases for a determined period of time. Basically, you’re buying yourself some time, in which you can return the money, interest-free. In fact, this is actually cheaper than an IRS payment plan or a personal loan!
On the other hand, in any other situation, considering the fees credit cards involved, paying your taxes with them isn’t the best idea.