Paying income tax with credit card
Paying Income Tax
The different ways you can pay your taxes with a credit card
If you have taxes and want to perform paying income tax with credit card on the federal government site, there are several ways to make your payments. The IRS only authorizes three different companies to accept payments on your behalf through a debit or credit card. However, these companies may charge “convenience charges” on their payments.
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When paying by debit card, there is a flat rate, currently between $ 2 and $ 3.95, depending on which of the three payment processors you choose and, for a company, the payment is more than $ 1,000. Paying a debit card is one of the least expensive options, since the rate will always be less than $4. One of the advantages of a debit card (or credit card) is that you will receive an immediate payment receipt, which can be important if you apply for a loan when you declare a tax obligation. Eliminates the possibility of losing a check in the publication. Unfortunately, there are no debit cards that reward you for this type of transaction (the SunTrust Delta Sky Miles debit card only offers rewards for PIN or based transactions, which are not related to paying taxes online).
When you use a credit card to pay your taxes, the fee charged will be much higher than if you use a debit card. The convenience rate of the credit card is calculated as a percentage of the amount paid. These rates are currently between 1.87% and 1.99%. In the past, these payment processors charged different fees depending on the payment network associated with the card, while American Express cards had a higher rate. However, in recent years, each of these payment processors has begun charging the same rate to each card, regardless of the payment network associated with your credit card. Last year, the three authorized payment processors began accepting payments using digital wallet services.
The benefits of paying taxes by credit card
- You can use a credit card with a credit limit large enough to pay your taxes. Then you have the flexibility to pay your credit card over time according to the terms of your credit card. Sometimes, your credit card issuer has less stress than you owe the IRS. Here are some benefits of paying your taxes to your credit card.
- You can get rewards in the balance when you use a credit reward card. Take advantage of the reward given by your credit card by putting your taxes on your credit card. Be careful, some credit cards have restrictions on the type of purchases and minimum charges before starting to reward you.
- You will have more time to pay your tax bill without submitting additional forms. If you put your taxes on your credit card, you can pay your tax bill beyond the deadline of April 15. The IRS also has this option, but you must submit additional forms to take advantage of it.
You can avoid the benefit if you can make use of a 0% initial credit card on purchases and you can pay the credit card balance before the end of the initial period. That is a lot of “yes” so proceed carefully.
Disadvantages of paying taxes with credit
Despite the ability to obtain rewards and take additional time to meet your tax obligation, there are some serious inconveniences to paying your taxes by credit card.
- You will pay interest on the tax you owe. The later you pay your credit card balance, the more you will pay interest. With a low interest rate credit card, the balance of the advertising interest rate will reduce the amount of monthly financial charges you pay.
- There are convenience charges. When you pay your taxes with a credit card, the IRS charges a convenience fee of 2.49 percent of your tax bill. If you have $ 1,000 owed, for example, the convenience fee will be close to $ 25. A $ 10,000 tax bill will cost you $ 250 credit card. Of course, the more you have in taxes, the higher the convenience fee. .
- You cannot borrow bankruptcy. The income tax is one of the types of debt. That cannot be declared bankrupt (in addition to child support and cancer). Therefore if you have financial difficulties later. Keep in mind that bankruptcy will not discharge the credit card debt incurred by taxes.
- Your card issuer may think you are in danger. If you need to use your credit card to pay your income taxes. Your card issuer can see it as a sign of financial problems. After all, why would you use your credit card if you could pay your taxes? As a result of the increased risk. Your issuer may increase your interest rate card. Reduce your credit limit or even cancel your credit card.
Assess the risk of paying taxes by credit card
In conclusion, paying income tax with credit card can give you the flexibility to pay over a period of time. But it should be considered as other credit card purchases should be. Your balance is still subject to your credit card agreement. Your creditor will continue to set an interest rate and rates. Late payments will be included in your credit report. Will affect your credit score and may affect your ability to obtain credit cards and loans in the future.