Pros and Cons of Paying Taxes WIth Plastic

 

Many Americans still rely on credit cards to pay for necessities including debts owed such as taxes.  The IRS allows taxpayers to pay taxes with a debit or credit card.  If you owe taxes and will not be able to pay the debt via a payment plan or cannot borrow money to pay the taxes owed, your only other option may be to pay with a credit card. 

Some taxpayers pay with their taxes with a debit or credit card just for the convenience – others because they neglected to take out enough money during the year to pay their taxes or did not have enough deductions to get a refund.  Here are some pros and cons about paying your taxes with a credit card or debit card.

Paying with credit card

Pros

1. Convenience.  You can pay by phone, internet, efile through IRS or IRS approved service providers
2. The IRS website is safe and secure – you cannot ensure safety and security on other websites
3. You may be able to earn miles, points or rewards from your credit card company
4. You can pay using Visa, MasterCard, Discover or American Express
5. You can make partial payments or setup an installment agreement
6. The filing fee is tax deductible
7. You can make a payment less than $100,000 via the IRS website at www.irs.gov, larger payments must be made through a third party website

Cons

1. You have to pay a fee when paying via a service provider
2. An immediate release of a federal tax lien is not provided
3. Payments made through service provider or credit card company may fail
4. Depending on the interest rate charged on your credit card, if you don’t pay the card balance off within a few months you will end up paying more money than the taxes owed to the IRS
5. Beware of scam companies appearing as service providers

Paying with debit card

Pros

1. Convenience.  You can pay by phone, internet, efile through IRS or IRS approved service providers
2. The IRS website is safe and secure – you cannot ensure safety and security on other websites
3. The is a flat fee charged per transaction
4. You may earn rewards from your debit card company
5. You can make a payment less than $100,000 via the IRS website, larger payments must be made through a third party website
6. You can make partial payments or setup an installment agreement
7. The filing fee is tax deductible
8. Don't have to worry about paying penalty charges, late fees or interest if paid in full
9. Can make a payment less than $100,000 via the IRS website, larger payments must be made through a third party website

Cons

1. Have to pay a flat fee when paying via a service provider
2. Immediate release of a federal tax lien is not provided
3. Payments made through service provider or credit card company may fail
4. Be aware of scam companies appearing as service providers