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Paying Taxes by Credit Card

Paying off the IRS can be a hassle, especially if you're short on cash. You can charge your taxes to your credit card, but there are pros and cons of doing so. On the one hand you'll get the IRS paid off, on the other hand you'll be stuck paying interest on your taxes. On top of any finance charges, you'll need to go through a third party processor as the IRS doesn't accept credit card payments directly. Those processors charge a fee of 2.49% of your tax bill.

Now, it may be cheaper to just set up a payment plan with the IRS. The IRS will charge you a set up fee (usually from $42 to $105), plus interest of 6% annually plus a late payment penalty of 0.5% per month. Thus penalties and interest add up to about 12% annually, which might be cheaper than the interest rate on your credit card.

Saturday April 12, 2008 | comments (1)

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