Is it it possible to pay taxes using a credit card?

Avatar
By:
Checking Credit Card

When it comes to the United States, almost 80% of the taxpayers end up getting a part of their money back every year. However, there are also a couple of people who are unfortunate enough to find out that they still owe money to the IRS. In this case, things can be a little complicated it they don’t have enough cash to pay taxes until the deadline…

And the chances for this to happen are actually pretty big!

According to The Motley Fool, almost 40% of Americans don’t have any money in the bank. Therefore, when they’re in the situation in which they need to ‘solve’ their tax bills, they can be tempted to rely on credit cards.

Technically speaking, this is an option worth considering. But, if it’s not done properly, it could cost you some serious money down the line.

If you choose to pay taxes using a credit card because it looks convenient, our recommendation is to avoid this, since it’s way better to do it with a bank account. Why’s that? For starters, you will be charged a processing fee instantly, just because you’ve used a credit card. On the other side, by sending money directly from your bank you won’t pay any additional amount.

And we’re not done yet with the minuses…

Paying your tax bill by credit card is done mostly by people who don’t have all the money up front. Again, this is possible, but it’s way better to get an installment plan with the IRS. Indeed, you will pay a bit to set everything up, but on the other side, you can save by avoiding credit card fees and interest rates.

It’s good to know that a short-term IRS payment plan, split over 120 days or less, won’t cost anything to set-up. In contrast, longer-term plans can cost you up to $149 to initiate. People who want to pay taxes and have a low income can get a break on that fee, though. And starting from this point, any additional interest you need to pay depends on how long you need to pay off your tax debt in full.

To sum up this procedure, if you want to pay through the IRS’ plan, you will pay around 5% in interest.

As for the credit card, most of them charge 20% interest or even more. Considering this, you should really think twice before using one to pay your taxes. Yes, it is possible, but it’s not really worth it, unless you’re in an extreme situation.

checking accounts
>