When you can afford to pay taxes in a certain year you have the option of paying the taxes by your credit card. Many people also prefer to pay by credit card because it is convenient and quick. The other options of paying the taxes when you cannot afford to pay the tax are:
· You can pay the IRS late. The monthly late fee is 1% of the balance due, $20 on a $2000 tax balance.
· You can set up a payment plan with the Internal Revenue Service for a one-time fee of up to hundred and five dollars plus monthly interest.
· You can pay by credit card.
Before you pay by credit card you should understand that you will be subject to the terms and conditions of your credit card agreement. There are several advantages and disadvantages of paying by credit card.
The Benefit of Paying Taxes by Credit Card
The main advantage of paying taxes by credit card is that you’ll have more time to pay them off. Many charge your taxes your credit card your taxes get paid off but you can resolve the balance and continue to pay your tax beyond the April deadline. You can avail of the same facility through the Internal Revenue Service but you need to file additional forms and paperwork.
You may be able to earn rewards on a credit card that offers rewards for putting your taxes on it.
Disadvantages of Paying Taxes by Credit Card
Disadvantages of paying taxes by credit card are that you may end up paying more money as interest if you are intending to revolve the balance in the future. It is a good idea to use a low interest credit card so that your financial charges or minimum at the end of the month. There may also be certain convenience fee which is charged by the IRS on your tax Bill. It is typically 2.4% of the tax balance.
Another effect of using a credit card to pay your taxes is that the creditor might think that you are having financial trouble. This will only be the case if there is other information on your credit file pointing towards extensive use of credit as means of supplementing income. Result could be that creditor could increase the interest rate on your credit card, lower your credit limit or even cancel your credit card.
All things said and done putting your taxes on a credit card should be considered like any other purchase you make using a credit card. The balance is still subject to the credit card agreement and interest rate and other charges will be applied if you choose to revolve the balance. Any late payment will be reported to the credit bureau and you will not be able to bankrupt the tax balance ons your credit card.