Is It Wise To Pay Tax Debt with a Credit Card?
There is no easy way to pay that pesky tax bill to the IRS. If you are facing a large bill and are not sure the best way to pay, you may be wondering what your options are. If you do not have the full amount tucked away in a savings account, you may be considering trying to negotiate a payment plan with the IRS or trying to take out a loan. You may not realize that the IRS also accepts a wide variety of credit cards – including Visa, Mastercard, American Express or Discover – as forms of payment for a tax bill. Paying your tax debt using a credit card is an interesting option with some definite pros and cons.
Benefits of using a credit card to make your payment to the IRS:
- Convenience: Payment can be made fast and easy. You can make this payment online, by phone or when you e-file.
- More Time: You can wait until the very last minute to pay (April 15th) and know that your payment will be received by the IRS without penalty.
- Flexibility: Once you put the tax debt on your credit card, you can determine when/how you pay it off. You are no longer bound by the April 15th deadline.
- Lower interest: It is true – it is very possible that the interest on your credit cards is less than the interest, fees and penalties that you would accrue should you pay the IRS late.
- Rewards: Many credit cards carry rewards for cash back options when you make charges. If you have one of these types of cards, you might be able to earn additional points, airline miles or other bonus items.
Disadvantages of using a credit card to pay the IRS:
- Negative changes to your credit score: If you elect to use a credit card for your tax bill and are not able to pay it off for a significant period of time, it may ultimately lead to a decline in your credit score as it will change your debt to income ratio.
- High interest cards: There are many high interest credit cards that could have you paying your tax bill plus hundreds of additional dollars over time. If you decide to use a credit card to pay the IRS, you should review all of your credit cards and use the one with the lowest interest rate.
The most important thing to remember no matter how you plan to pay your debt to the IRS is to pay on time. Paying the IRS after the submission deadline is the most costly thing that you can do. We recommend that you think about the best possible way to manage this financial issue and weigh the pros and cons for yourself and your family. You can also consider getting help to be sure that you are not paying more than you should. Success Tax Relief is a full service tax firm that helps many individuals and families make a plan for what they owe and make changes so that in future years, you will NOT find yourself in the same position. Contact Success Tax Relief today to make sure you’re not overpaying and discuss your payment options.