Hidden Costs Of Paying Taxes By Credit Card

Consumers may wish to read the fine print when paying their taxes via credit card

Hidden Costs Of Paying Taxes By Credit Card
April 11, 2016

With the IRS tax deadline approaching, some U.S. taxpayers are rushing to complete their 2015 personal tax returns and pay the money they owe. While some will mail in personal checks, others will turn to the Internet to make an online payment via debit or credit card, but consumers are urged to note what fees may be charged if they do so.

The IRS cannot legally pay any transaction fees on credit card payments. Because of this limitation, all taxes paid via credit card are done so through a third party, not the IRS itself. This means payers will be charged a convenience fee in addition to the transaction fee. For those who owe very little, this fee may be less than $3.00. However, those who owe more may pay as much as 2.25 percent of the amount owed. Each third party vendor charges different rates, so users should read all the information provided before entering their credit card details.

Those who are short on funds and unable to pay their taxes before the April 18 deadline may be tempted to pay by credit card. Experts warn, however, that the transaction fees plus the credit card company’s interest charges could actually be more than the IRS would charge to set up an installment plan. Those who plan on applying for credit in the near future may also want to rethink their plan to pay their taxes on credit since it will increase their overall debt.

If you want more credit, check out MoneyTips’ list of credit card offers.

Photo ©iStockphoto.com/ Pinkypills

  Conversation   |   11 Comments

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trish | 04.11.16 @ 15:01
Hoping to avoid this option at all costs. Just waiting on the federal to be deposited to pay our State...from checking!
Steffanie | 04.11.16 @ 15:02
We try very hard not to use a credit card to pay our yearly taxes. It was so much easier when they gave us money back!
STOKES | 04.11.16 @ 15:03
Wow. I never even considered that. Note to self: never pay taxes by credit card.
Carla | 04.11.16 @ 15:03
This is good to know. I had no idea that there were fees on even a debit card payment for taxes. We will not be using this method.
Daniel | 04.11.16 @ 15:04
Many times such as this using cards to pay other debts really should be a last resort in my opinion due to these hidden costsd
Jonathan | 04.11.16 @ 15:04
All this stuff makes good sense. THANKS FOR SHARING!
Erin | 04.11.16 @ 15:05
We used our federal return to pay the state taxes this year. I would avoid using a credit card if at all possible.
Leslie | 04.11.16 @ 15:07
It never occurred to me that you could pay your taxes with a credit card. Knowing that the IRS will help you with a payment plan if you can't pay all at once it's good to know also. Maybe fewer people will try to skip paying them if they had this info.
Alec | 04.11.16 @ 15:07
I didn't know you could pay taxes with a credit card. Should I ever be in the situation where I may need to, now I know about the 3rd party fees and will reconsider it. I'd be setting up an installment plan instead.
Kamie | 04.11.16 @ 15:07
This option really should be the last resort, but at the same time, if you save more money than doing a payment plan, than it would be good, plus it would technically help out your credit as you will show good in paying the credit card company back.
Chrisitna | 04.11.16 @ 15:09
I think the last paragraph should actually say that what you pay in fees and interest charges could be MORE than what the IRS charges -- the IRS actually has the most affordable repayment plan :).
$commenter.renderDisplayableName() | 06.17.21 @ 06:18