Why pay­ing taxes by credit card prob­a­bly isn’t a good idea

The Denver Post - - BUSINESS -

Taxes have to be paid, and putting them on your credit card might seem a good op­tion. Maybe you need more time to come up with the money, or you’re imag­in­ing the re­wards you could rack up by putting a big ex­pense on your card. But it prob­a­bly isn’t a good idea, and here’s why. YOU’LL PAY PRO­CESS­ING FEES When you buy some­thing with a credit card, the mer­chant pays pro­cess­ing fees to the fi­nan­cial in­sti­tu­tions that han­dle the trans­ac­tion. But when you put a tax pay­ment on a credit card, the IRS doesn’t pay those pro­cess­ing fees. You do.

You will have to use one of the IRS’ third­party credit card pro­ces­sors, which charge fees of 1.87 per­cent to 2 per­cent of the amount you put on the card. If you use soft­ware such as Tur­boTax to file re­turns and pay taxes on­line, the fees may be higher. YOU COULD IN­CUR IN­TER­EST CHARGES “De­pend­ing on the in­ter­est rates on your credit card, you could end up pay­ing a lot,” says Tr­ish Even­stad, pres­i­dent of the Wis­con­sin So­ci­ety of En­rolled Agents , a group of tax ex­perts. Her ad­vice to peo­ple who can’t pay in full: “Pay as much as you can by the April 18th due date, then you can set up an in­stall­ment agree­ment with the IRS to pay the re­main­ing bal­ance.” YOU COULD HIT YOUR CREDIT LIMIT Charg­ing a big tax bill on your card could put you within spit­ting dis­tance of your credit limit, mak­ing it easy to max out the ac­count and in­cur penal­ties. Your credit could also suf­fer. NerdWal­let


The down­side of pay­ing your taxes with a credit card, such as fees, may negate any pluses. As­so­ci­ated Press file

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.