USA   |   UK   |   Australia   |   Canada
ADVERTISEMENT

How (and when) to use credit cards to pay taxes

It's not wise to go into debt for the IRS, but if you must, here's how

By CreditCards.com

Going into debt (or maybe deeper into debt) to pay your taxes may not be the wisest call in the financial playbook, but during desperate economic times, some people may not have much choice.

Taxes, credit, debt and you
Taxes, credit, debt and you

These CreditCards.com articles about taxes, credit and debt will help you navigate tax payment options, tax liability, tax-time identity theft and manage your credit and debt at tax time.

If you're one of those people, this is how it works:

The ever-helpful folks at the Internal Revenue Service have made it fairly easy for you to settle your tax debt by whipping out the plastic. All you need is an Internet connection or a telephone  --  and, of course, a valid credit, debit or ATM card that is loaded up with sufficient firepower.

Multiple payment choices
Several intermediaries handle the payments and all accept major credit cards such as Visa, MasterCard, American Express and Discover. Be careful: They all charge "convenience fees"  --  in some cases, a flat fee of $3.95; in other cases, between 2 percent and 2.5 percent of the tax payment. These fees are subject to change, so be sure to pay careful attention as you move through the process. The IRS announced a rule change, updated on April 7, 2010, that makes paying this fee a little less painful, at least for some: It made the fee for paying taxes by credit card deductible, if you meet certain conditions.

The IRS says it does not harvest your credit card information, and any information you provide is not disclosed to the tax man by the intermediary except for information required to process and deliver your tax payment.

In addition, most of these intermediary services can handle tax payments to a variety of state and local governments, along with payments to utilities, courts or traffic-citation agencies, schools, etc. But again, be careful: The convenience fees can add up.

Finding intermediaries
How do you find these intermediaries? Easy.

The IRS provides a handy and informative online guide to making any of these payments via credit or debit cards. The guide includes links to the various services.

Before you begin, give that Web page a good look. It provides a great deal of information about how the system works, how payments arrive to the taxing agency, how confirmations are delivered to you and precisely what flavors of federal tax payments (i.e., which IRS forms) lend themselves to this service.

The IRS also notes, accurately, that using your credit card for this purpose can earn you miles, points or modest refunds, depending on what -- if any -- rewards program your credit card might feature.

But also keep in mind that any time you use a credit card, you are adding to your debt levels. So prudent thought should be given to availing yourself of this service at tax time.

See related: Canceled debt will lead to IRS tax

Updated: April 8, 2010



Join the discussion

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Three most recent Legal, regulatory, privacy issues stories:

Share This Story




Follow Us!


Credit Card Rate Report

Updated: 11-27-2014

National Average 14.98%
Low Interest 10.37%
Balance Transfer 12.73%
Business 12.85%
Student 13.14%
Reward 14.93%
Cash Back 14.94%
Airline 15.46%
Bad Credit 22.73%
Instant Approval 23.33%

ADVERTISEMENT
ADVERTISEMENT