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The Worst Way to Pay Your Taxes: Put Them on a Credit Card

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Tax credit cardMillions of people across the nation are looking forward to a nice refund check from the IRS. But if you're one of the unfortunate ones who has to cut a check to Uncle Sam this year, you'll want to steer clear of one increasingly popular way to pay taxes: using your credit card.

Many people are so scared of the IRS that they'd do just about anything to avoid any potential problems. That's one reason that paying your outstanding taxes with a credit card is so appealing: One click and you're done.

But the price of using a credit card is simply too high compared to the alternatives.

The private companies that the IRS has authorized to accept credit card tax payments charge as much as 2.35% in convenience charges up front. Even worse, if you can't pay off the resulting balance on your card, you'll boost your finance charges -- and with typical cards carrying annual rates of 16% or more, those charges will add up in a hurry.

Cheaper Ways

If you have the money to pay by check, it makes far more sense than charging it. Unless you earn perks like cash-back rewards or airline miles that are worth more than the 2.35% fee, there's no good reason to pay it.
Even if you can't afford to pay your whole tax bill right now, a better alternative for some is to use the IRS' own procedures to get some relief. Requests for up to 120 days of additional time to pay in full carry no fee, and although interest continues to accrue, the current annual rate of 3% is far less than what many credit cards charge. Longer repayment plans come with an application fee, but it can still be worth it if you can qualify for reduced IRS penalties.

So if you're trying to figure out how you'll pay your taxes next week, think twice before you use your credit card. You might be far better off seeking another way to pay.

For More on From The Tax Center:


Motley Fool contributor Dan Caplinger is paying his taxes the old-fashioned way next week. You can follow him on Twitter here.

NEXT: Celebrity Tax Delinquents




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stampede334

Since I owed money to IRS....I was told that if I made payments that it would show up on my credit report and I refuse to do that....I didn't have that much cash on me since I made the biggest mistake of moving to another state that pays HORRIBLE. I ended up using my credit card to pay the darn thing! Next year...that is not gonna happen to me!!!

April 15 2013 at 9:57 AM Report abuse rate up rate down Reply
ED

People live off of their credit cards, at least most of them. I fail to see the point in this article. That's what credit cards are for. TO USE. How, and when, they pay the balance is another issue. Of course, if you can afford to pay the balance off every month, then what's the point of having the card? LOL

April 15 2013 at 9:12 AM Report abuse rate up rate down Reply
atragon

IRS has always been easier to deal with than state Depts of Revenue. In my state you have to negotiate a settlement if you can pay; that can take up to a year, has to be approved by the Attorney General, and in the meantime, the taxes and penalties continue to accrue, making any attempt at offer-in-settlement a moot point for most people. This is why the Tax Codes need to be upgraded and put in line across the country.

April 15 2013 at 8:51 AM Report abuse rate up rate down Reply
Shaun

We are not...I repeat NOT a DEMOCRACY....A DEMOCRACY is the fake ALL CAPS NAMES that are CORPORATIONS of us all on our driver's license, social security cards, any bill, credit cards birth certificate...Go look at a cemetery and see the ALL CAPS NAMES on the gravestones...They are all DEAD!!!....We are a Living Republic!!!...and the Living is always over the DEAD in Law!!!

April 15 2013 at 5:20 AM Report abuse rate up rate down Reply
Mark Fulbright

35mm pics with time stamp and on cd copy of check or money order tax forms envelope with postage at the mail box outside of the post office

April 15 2013 at 3:48 AM Report abuse rate up rate down Reply
shanesur23

What's with all these Puerto Ricans mailing mailing fire places to my tree house?

April 15 2013 at 3:41 AM Report abuse rate up rate down Reply
lowbug

I was charged an additional $1.40 about 20 minutes ago. Didn't have to write a check, write out the LONG address plus my own return addie and slap on a 48 cent stamp, drive through the narrow busy streets and toss it in the box. I remained home nice and dry from the weather! I think the additional 92 cents were worth the effort.

April 15 2013 at 12:14 AM Report abuse -1 rate up rate down Reply
1 reply to lowbug's comment
ED

Wait until the IRS sends a bill. You'll get a pre-addressed envelope....LOL

April 15 2013 at 9:14 AM Report abuse rate up rate down Reply
Dan Arnold

Another good reason not to pay taxes with a credit card is if your state gets hacked like South Carolina did the hackers might get all your personal information as well as your card number.

April 14 2013 at 11:36 PM Report abuse -1 rate up rate down Reply
Nancy

Well, of course that doesn't make sense but if you have no choice, you do what you have to do.

April 14 2013 at 10:16 PM Report abuse +4 rate up rate down Reply
1 reply to Nancy's comment
ED

I guess the author of this would want you to send them a rubber check, and if you have balance protection, you can pay that large fee.

April 15 2013 at 9:15 AM Report abuse rate up rate down Reply
impactvqi

Longer repayment plans come with an application fee, but it can still be worth it if you can qualify for reduced IRS penalties.
just another way that the irs will get your money an application fee and a person shoulden't have to fill out an application the irs knows who you are and has all your information

April 14 2013 at 9:42 PM Report abuse +2 rate up rate down Reply
1 reply to impactvqi's comment
ED

I think, what you are referring to as an application, is the form you fill out AGREEING to the terms of repayment.

April 15 2013 at 9:16 AM Report abuse rate up rate down Reply