For most taxpayers tax season means a nice refund. However, for some taxpayers, the news is not as good. So what if you’re one of those taxpayers that owes the IRS money after filing your return? How should you pay it off? For example, could you pay off your tax bill with a credit card?
Yes, you could use a credit card. But is that a good idea? It’s probably not, in most cases. In reality, it should be a last resort. If you simply can’t afford to pay your tax bill then using a credit card might be a viable option. However, there are some things you should know.
If you use a credit card, you’ll also have to use a payment processor. And that means you’ll have to pay an extra fee for that. The IRS also limits how many times you can use a credit card to make tax payments in a given year. If you’re paying your prior- or current-year taxes then you can only pay via credit card twice per year. That is unless you use an installment plan.
The other thing to keep in mind is interest. Unless you open a new, interest-free card and pay off tax your bill within the interest-free period, you’ll have to pay interest on your credit card bill. That means your overall bill will be even higher.
In most cases, you’re better off setting up a payment plan with the IRS and avoiding the extra fees and interest that come with using a credit card.
The post Is Paying Your Taxes With a Credit Card a Good Idea? first appeared on Advisors to the Ultra-Affluent – Groco.