Got a big tax bill, and wondering how to pay it? You can charge your taxes on a credit card…but you will pay a processing fee. Payment processors such as Pay1040.com, PayUSAtax.com, ValueTaxPayment.com, OfficialPayments.com and ChoicePay.com allow taxpayers to pay tax bills by credit cards. But you’ll more than pay for this convenience with the processing fee you’ll be charged.
Processing Fees Vary According to Payment Processor
OfficialPayments.com has the highest processing fee at 2.35%. PayUSAtax.com, ValueTaxPayment.com and Pay1040.com have the lowest fees. Each charge a 1.87% processing fee. ChoicePay.com charges a 1.88% fee when you pay a tax bill by credit card.
When you choose to make a tax payment by credit card, you usually can’t cancel the payment. So it’s important to only charge what you can easily manage to pay. Also note that fees can differ when you choose the integrated IRS e-file and e-pay options.
How Taxes Appear on Your Card Statement
When you pay your tax bill by credit card, the payment will be listed as “United States Treasury Tax Payment” on your card statement. And the processing fee that you pay the payment processor will be listed as “Tax Payment Convenience Fee” or something similar.
Choose the Best Card
If it will take a few months or more to pay off a tax bill charged on a credit card, choose your credit card with the lowest interest rate. Using a card with a 0% introductory interest rate and paying the full tax bill before the teaser ends would be ideal.
Some taxpayers may want to reach for a rewards credit card because the rewards, such as a cash back offer, will help to offset the processing fee that they pay. Before you pull out a rewards card to pay for a tax bill, take a close look at the card’s interest rate and calculate how long it will take you to pay the bill in full. Carrying a big balance on a rewards card with a high interest rate may not be worth the rewards that you earn.
Related Article: Do Taxes Affect Your Credit Score?
Updated on January 23, 2015