Should You Pay Your Income Tax with a Credit Card?

If you don’t have the money to pay your income taxes by the due date, you have three choices:

• You can pay late for a monthly fee of 1 percent of the balance due per month, $10 on a $1,000 tax. (Be sure to file on time even if you can’t pay.)

• You can set up a payment plan with the IRS for a one-time fee of up to $105.

• Or, you can pay by credit card. If you think you can soon pay off the charged taxes, there may be advantages.

The Advantages:

• It’s convenient – taxpayers can e-file or paper- file early and make a payment by credit or debit card later, to delay out-of-pocket expenses. Payments can be made by phone, Internet or when e-filing.
• It’s safe and secure – standard, commercial card networks are used. The IRS does not receive or store card numbers.
• These electronic tax payment options are available through service providers.
• There is a fee charged by service providers. Fees are based on the amount of the payment and may vary by service provider (see table below).
• Payment information will not be disclosed for any reason other than processing the transaction authorized by the taxpayer.
• A confirmation number is provided at the end of the phone or Internet transaction.
• The “United States Treasury Tax Payment” is included on the card statement as further proof of payment. The convenience fee will be included on the statement as a “Tax Payment Convenience Fee” (or similar transaction).
• If enrolled in such a program, taxpayers may earn miles, points, rewards or money back from the credit card issuer.

The Disadvantages:
Unless you have a low-interest deal, you could pay a lot of interest before the credit card charge is paid. There are costs. The IRS charges a convenience fee of 2.49 percent of your bill. If you owe $1,000, the fee will be about $25. A new, large charge on your credit card could affect your credit score, especially if the tax charge puts you over 50 percent on your card limit.

For more information on ePay service providers and applicable fees, visit the IRS website.

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