The IRS can’t directly accept credit card payments due to tax laws.
However, they can accept payments through a third-party processor. For example, online tax preparation companies are third-party processors since they are designated by a merchant to handle transactions for merchant acquiring banks. They can then assist you in making your credit card payment towards your tax bill to the IRS.
Here’s what you need to be prepared for when you plan on using the credit route.
There are no flat fees when using your credit card.
Keep in mind, when using your credit card, there are processing fees, convenience fees, and interest. Here are some things you may want to factor in when using your credit card to pay off your tax bill:
- Processing fees are between 2% to 3% of your transaction
- Convenience fees differ with each company
- High-interest charges if you can’t pay off the balance
- Your credit limit could be reduced
- Damage to your credit report due to a hefty tax bill
- Additional IRS fees including late-filing or failure-to-pay penalties
You could get some cash back.
Choosing to pay your tax bill using your credit card can be difficult. Although, when some taxpayers don’t have a substantial amount of taxes, paying your tax bill using your credit card could be convenient. Let’s say you want to earn some cash back. You could use your new credit card if you’re guaranteed a sign-up bonus. On top of that, you could earn points, rewards, and frequent flier miles. One recommendation is using a card with 0% APR which does not have interest.
Let’s not forget, there are other options.
Sometimes, it’s better to take your time. You could choose to pay directly to the IRS using direct pay, Electronic Funds Withdrawal (during e-filing), Same-day wire, Check or money order, and Cash.
If you’re losing your mind over how you’re going to pay your tax bill, utilize the IRS installment agreement payment plan which we can also provide to you to file your 2017 tax return.
| Payment Plan | Cost to Apply Online | Cost to Apply by phone, mail or in person | Extra fees |
|---|---|---|---|
| Short-term payment plan (120 days or less) | $0 | $0 | Plus penalties, interest and paying by card. |
| Long-term Installment Agreement (More than 120 days through automatic withdrawals) | $31 setup fee (low income: setup fee waived) | $107 | Plus penalties and interest |
| Long-term Installment Agreement (More than 120 days) | $149 setup fee (low income: $43 setup fee that may be reimbursed if certain conditions are met) | $225 | Plus penalties, interest and paying by card. |
You can choose to break up your payments within 120 days and pay the minimum installment of each month until you pay off your tax liability. PriorTax assists customers in arranging a payment plan so they can finally pay off their taxes.
Regardless of your payment method, there can be drawbacks.
The bottom line is, if you are looking to avoid paying extra, this option may not be right for you. On the other hand, if you’re responsible with your credit, go for it! File your 2017 tax return if you know you might have a tax liability. Now’s the time since October 15; the e-file and extension deadline is approaching.
Tags: cash, check, convenience fee, credit card, debit card, direct pay, e-file, efile, efile deadline, electronic funds withdrawal, extension, extension deadline, failure-to-file, failure-to-pay, fees, flat fee, IRS, IRS address, IRS payment plan, IRS penalties, IRS updates, money order, october 15, processing fees, same day wire, tax deduction, tax due, tax extension, tax liability
