Tax refunds are one of the most sought after benefits of credit cards. In 2018, will you be able to pay your taxes with a card?
The “what is the fee for paying taxes with credit card” is a question that has been asked many times. The answer to this question is that there are no fees associated with using a credit card to pay taxes.
If you have a credit card, you may have questioned if you can use it to pay taxes. Taxes can be paid using a credit card, but it won’t be free. On the other side, there is a chance that you will get advantages like accumulating points or reaching your credit card spend criteria to qualify for the welcome bonus.
Continue reading to find out more about paying the IRS using your credit card, including all of the possible advantages and possible costs.
Related: Contribution and withdrawal tax regulations for 401(k) plans
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Can You Use a Credit Card to Pay Taxes?
You have a variety of payment methods available to you if you owe the IRS money for unpaid taxes, and using a credit card is one of them. Through a third-party payment processor, the IRS allows credit card payment for tax payments. However, there will be costs associated with using a credit card when making a payment to the IRS via the businesses that are permitted to take credit card payments.
In order to determine if paying these fees is worthwhile for you, it is crucial to carefully weigh the advantages of paying taxes using a credit card. Additionally, before using a credit card, make sure you fully comprehend any related terminology.
DepositPhotos.com, source of the image.
What Advantages Are There to Filing Taxes on a Credit Card?
Paying taxes using a credit card as opposed to a cheque, direct transfer, or money order has a few key advantages. This includes using your credit card to earn points, getting a welcome bonus, or spending enough on your credit card to qualify for a bonus. Some taxpayers could also choose to use a credit card to fund their payment, either by delaying payment or taking advantage of the credit card’s interest-free grace period.
Kitzcorner / istockphoto, source of the image.
1. Rewards: Cash Back, Points, and Travel Rewards
Possibility of receiving travel points or cash back from the credit card is among the major advantages of paying taxes with a credit card. Some of the best rewards credit cards might provide benefits that can cover the charge even with the credit card processing fee. You would want to choose a card or cards that give more than 2 percent cash back, or the equivalent in incentives, for instance, if the credit card charge is 2 percent.
B4LLS/iStock, thanks for the photo.
2. Acceptance Bonus
You can be eligible for a significant new account welcome bonus on one or more credit card offers if you have a sizable tax bill. Even secured credit cards may provide these welcome incentives, which may be worth up to $1,000. It may be a simple decision to pay your taxes using your credit card if these incentives are more valuable to you than the 2 percent credit card charge.
Large minimum spending criteria must be met in order to qualify for some of the top welcome bonus deals. Paying your taxes might be a means to cover all or a major part of that required expenditure if you are otherwise unable to do so. Depending on how much your tax bill is, you could even be able to receive more than one welcome bonus by dividing the tax payment between two reward credit cards.
To prevent getting into debt if you go forward with this, make sure you fully understand how credit card payments operate.
Farknot Architect/istockphoto is the source of the image.
3. Reach Your Card Spending Limit
Some credit cards have spending requirements above and above those needed to qualify for a welcome bonus. This may be just another justification for paying your taxes using a credit card. For an airline or hotel loyalty program, for instance, meeting these spending requirements might advance you to the next tier of elite membership. You could also get a free night’s stay voucher or a companion airfare ticket if you spend a specific amount.
When paying your taxes with a credit card, you must decide if the status or other advantage is worth the processing price. For example, adding debt on your card that you don’t have the money to pay off won’t raise your credit score.
DepositPhotos.com, source of the image.
The IRS Uses What Payment Processors?
The three payment processors that the IRS accepts levy various fees for credit card payments, which are as follows:
- 1.98 percent (minimum charge of $2.50) for ACI Payments, Inc.
- Pay1040: 1.87 percent; $2.50 minimum charge
- PayUSAtax: 1.96 percent; $2.69 minimum.
There can be a limit on how many times you can use a credit card to pay taxes each year, depending on the kind of tax payment. Additionally, tax payments above $100,000 could be subject to additional conditions and can only be completed over the phone. It’s crucial to weigh the benefits and drawbacks before choosing whether to pay your taxes using a credit card. You could benefit, but you might also incur significant expenses.
DepositPhotos.com, source of the image.
Benefits of Using a Credit Card to Pay Taxes
- Earn benefits, points, miles, or cashback for your purchases.
- Get more time to pay your taxes, particularly if you’re using a card with a 0% APR offer.
- surpass a spending limit
DepositPhotos.com, source of the image.
Cons of Using a Credit Card to Pay Taxes
- fees for credit card payments
- Your finances may suffer from high credit card interest rates.
- Debt might lower your credit score.
DepositPhotos.com, source of the image.
When to Think About Paying Your Taxes with a Credit Card
Consider using a credit card to pay your taxes for a number of reasons. Earning incentives from your credit card, such as travel rewards, points, or cash back, is one of the most common reasons, as was previously said. This might also include getting a credit card welcome bonus or spending a certain amount with a card to unlock additional membership levels or exclusive benefits.
You may set up a payment plan or apply an extension with the IRS if you need more time to pay your taxes. On the other hand, you should budget for penalties for the extension and interest on the payment schedule. To allow yourself more time to pay your taxes, you can choose to pay them using a credit card that has a 0% APR. The cost of processing credit cards will still apply, although it could work out to be less expensive.
Jirapong Manustrong/Istockphoto provided the photo.
During promotional periods, consolidating credit card debt
If you have additional debts that you may consolidate onto the card to pay off, this could also be practical for you. To avoid paying the high interest rates, be sure to settle the debt in full before the promotional period expires.
Finally, before using a credit card to make a large and significant payment like taxes, it’s crucial to have a thorough understanding of how cards function and how credit card payments work. A smart habit to develop is checking your credit card account on a frequent basis, particularly after paying taxes to make sure the transaction was successful.
DepositPhotos.com, source of the image.
The Lesson
It is entirely feasible to pay taxes using a credit card, but before using your plastic to send money to the IRS, you should weigh the benefits and drawbacks of doing so. One is that you will pay fees, which vary depending on the payment processor, and there is always a chance that taking on debt would harm your credit score. However, the likelihood of benefits and the extension of the tax payment deadline may exceed any drawbacks.
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This article originally appeared on LanternCredit.com and was syndicated by MediaFeed.org.
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The “pay irs by phone” is a question that has been asked quite often. It’s important to know if you can use your credit card for taxes.
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