by Natasha Gabrielle | Feb. 15, 2021
While you can pay your taxes with a credit card, you'll have to decide if that's a good idea.
With tax season quickly approaching, you may be realizing that you owe tax money to Uncle Sam. This time of year doesn't have to be stressful as long as you have a plan in place for how you will file your taxes and pay your tax bill.
Money may be tight, so perhaps you're wondering if it makes sense to use a credit card to pay your taxes? Keep reading to find out.
Yes, it's possible to pay your federal taxes with a credit card. But should you? It's important to be aware of extra fees that you will be paying when you use your credit card for tax payments. The IRS outlines these fees in advance. What fees you'll pay depends on the payment processor that you use. Here's the breakdown of the fees associated with third-party payment processors:
For example: If you owe $1,000 and use Pay1040 to make a payment, you'll pay $19.90 in fees. The higher your tax bill, the more you'll be paying in fees. While the fees may not be much for someone with a smaller tax bill, it can be a lot if you owe more. Always be aware of the fees before you rush to pay your tax bill this way.
If you file your taxes through an online tax preparation company, you will also be charged fees when using a credit card. Here's what common tax preparation companies charge:
H&R Block: 2.49%, minimum fee of $2.50
TurboTax: 2.49% minimum fee of $3.95
For example: If you owe $1,000 and use TurboTax to file and pay your taxes, you'll pay $24.90 in fees.
There's no workaround to avoid paying credit card fees when paying your taxes with a credit card. You'll need to decide if it's worth the fees to use your card.
It may make sense to pay your taxes with a credit card. Here are some examples:
Before rushing to grab your credit card on April 15, make sure you consider all payment options. While for some taxpayers, it may make sense to pay credit card fees, it may not be a smart idea for others. Always take a look at the pros and cons to make a more informed choice and have a plan in place to pay off your credit card statement balance.
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