Paying Taxes By Credit or Debit Card

paying-with-credit-cards

Cash or check may be soon replaced with Plastic or App in today’s economy. Even the IRS and several states give you the option to pay your tax bill online via credit or debit card today.

Authorized Service Providers

You will find a list of authorized service providers that accept online payments on behalf of the IRS at https://www.irs.gov/uac/pay-taxes-by-credit-or-debit-card. The companies have their own fee schedules which are listed on link above. They accept American Express, Discover Card, MasterCard, and VISA credit and debit cards. If you file early, you can still wait until April to make the online payment.

Paying With Your Return

Taxpayers may have the option of making credit card payments for the balance due on Form 1040, 1040A, or 1040EZ through tax software or through professional preparers using certain types of tax software. Some tax preparation software provides combined electronic filing and electronic payment for those who want to pay taxes with a credit card. But some tax preparation software may not allow taxpayers to make partial payments. At this time, our software does not offer the option to pay by card.

Various Tax Payments Available

In addition to balances due on individual returns, taxpayers can pay individual estimated taxes; installment payments; payments with extension of time to file (Form 4868); trust fund recovery penalty; and Form 5329 (IRA taxes) through this service. For forms in the 1040 series, credit card payment options begin in January. However, if you don’t pay your full tax liability by the due date in April (see below), you probably will be liable for interest and penalties. Certain business and fiduciary tax payments can also be made using the above methods.

Advantages and Disadvantages

One advantage of using the credit card method, aside from the obvious one of being able to delay paying your tax liability, is that if you participate in any credit card incentive program, such as airline mileage or certain reward programs, you will earn points by charging your taxes. A disadvantage is the convenience fee charged by service providers (both for credit and debit card transactions). This fee, may be deductible on next year’s return as a miscellaneous itemized deduction.

Summary

Like most businesses today, the federal government and some states accept credit and debit card payments. You will have to determine if the convenience and possible card incentives outweigh the fees associated with paying by credit or debit card.

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