Considering Paying Taxes with a Credit Card?
If you think that paying your taxes by credit card will help you accumulate
free airline miles, then you’re in for a surprise. The two IRS
authorized providers that offer this service charge a 2.49% service
fee. Thus, in reality, those free airline miles aren’t so free.
In addition, take into account the interest charged by the credit
card company.
On the other hand, if you don’t have the funds to pay the
amount owed before the due date, you will be subject to a ½%
per month (maximum 25%) interest penalty on the balance due. When
you compare the interest penalty that will apply once the due date
is missed, paying by credit card may be a viable option.
Whatever you decide to do, don’t
put off filing your return because you can’t pay off the balance.
Be sure to file your return or obtain an extension, because the
failure to file a return on time results in a 5% per month penalty
on the balance due (25% maximum). Don’t tap into your retirement
funds either, especially if you are under the age of 59-1/2 because
the taxes and early withdrawal penalties can eat up a substantial
portion of the withdrawal.
For 2006, the Internal Revenue Service has expanded the credit card
tax payment options with certain business tax payments being allowed.
The following is a summary of Federal tax payments that can be made
by credit card:
- Individual Tax Returns - Form 1040 (all types) including prior
tax years
- Balance Due Notice
- Estimated Tax Payments - Form 1040ES
- Automatic Extension Payments - Form 4868
- Installment Agreement Payments - Form 1040
- Employer's Quarterly Federal Tax - Form 941
- Employer's Federal Unemployment (FUTA) Tax - Form 940
Visa, MasterCard, Discover, and American Express are currently
accepted. Business tax payments are limited to only two credit card
payments per year for the 940 liability and two credit card payments
per return for the 941 liability. Federal tax deposit payments using
a credit card are not allowed. Business taxpayers can deduct the
2.49% convenience fee as a business expense.
The two authorized providers of this service are:
Link2Gov Corporation
(888) 729-1040
https://www.pay1040.com
Official Payments Corporation
(800) 272-9829
https://www.officialpayments.com/index.jsp
Another option is to request an installment agreement with the
IRS if you cannot pay the balance due. However, there is a $43 set-up
fee, and the IRS will apply the ½% per month late payment
charge and interest to the balance due. Please call this office
for assistance.
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