Paying Your Taxes on Credit

So you did not take enough out of your paycheck to pay your taxes all year. Now you owe the IRS. You are considering taking out a loan on your credit card to pay your taxes.  Paying Your Tax Bill with Credit? That convenience comes with a price. Let me give you the scoop on what happens if you put your tax bill on a credit card.
 

Some states also allow you to pay your state income tax bill with a credit card. Paying your taxes with credit cards is safe and secure, plus you can use the payments to count toward rewards if you have cards that offer them.

Let’s say you pay your taxes on credit and now your credit card is due. Now what?  

Paying A Price for ConvenienceHowever, you will pay for this convenience. The IRS doesn’t charge any extra fees. They don’t charge penalties for using credit to pay but service providers do. Uncle Sam isn’t going to eat those costs, you are.  Fees vary depending on how you’ve decided to pay.  

If you owe, for instance, $5,000, you might have to fork over $115 in convenience fees. And if you don’t pay your credit card balance in full, you could end up paying interest at the credit card issuer’s rate.  This rate might be higher than the IRS’ charge for installment payments.

Pay Now, Pay Later

If paying off your credit card bill for your taxes will be a hardship, you might want to consider whether you may qualify for the IRS’ installment plan. After an initial fee to set it up, usually $52 for direct debit, you’ll get a monthly interest rate on the outstanding balance which will likely be much lower than what a credit card provider charges.