If you can’t afford to pay your tax bill right now, you might be able to put the tax debt on your credit card. That is, if you have a credit card with enough available credit. If you don’t have enough available credit on just one credit card, you can split up the payments onto separate cards, or pay some in cash or some on credit card.
Benefit of Charging Your Taxes
Paying your taxes by credit card keeps you from owing the IRS. You won’t keep getting tax notices and you won’t have to worry about the IRS ruining your credit. Unpaid taxes have negative consequences – the IRS may put a tax lien on your property, garnish your wages, or put a levy on your bank account. None of these are things you want to happen. Before your taxes become extremely delinquent, look at your option to put it on your credit card.
Convenience Fees to Consider
If you’re paying your tax bill by credit card, you don’t pay the IRS directly. Instead, the IRS uses a third-party to process credit card (and debit card) payments. There’s a fee for using your credit card, which could be between 1.9% and 2.35% of the amount you’re charging depending on which provider you ultimately use. Here are a few of the websites you can visit to pay your tax bill:
- Pay1040.com – 2.35% convenience fee
- Businesstaxpayment.com – 2.35% fee
- payUSAtax.com – 1.95% fee
- ValueTaxPayment.com – 2.29% fee
- Officialpayments.com/fed – 2.35% fee
- Choicepay.com/MasterCard – 1.90% fee
Keep in mind the convenience fee is added to the total charge. So if you’re charging $5,000 of taxes with a 2.35% fee, the total amount billed to your credit card would be $5,117.50. Note that this fee doesn’t go directly to the IRS or the U.S. Treasury, but to the third-party who processes your credit card payment. These fees are assessed on all credit card transactions, but you don’t notice them because the merchant usually pays it for you.
While charging your taxes stops fees, interest, and penalties charged by the IRS, you’ll still have to pay interest that your credit card issuer charged.
Credit Card vs. Installment Plan
An IRS installment plan is usually a better option than paying your taxes with a credit card. Unfortunately, an installment plan isn’t an option if you’ve done one within the past five years. If your payments under an installment agreement is too high, a credit card might be a good option since minimum payments would typically be lower.
Offer in Compromise Settlement
If you simply can’t pay your taxes either with a credit card or installment agreement, you may be able to settle your tax debt through an offer in compromise. The IRS will usually accept your offer if they believe it’s more than they’d ever be able to collect from you otherwise. If the IRS accepts your offer, you can pay it as a lump sum or in multiple payments.
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