By Laura Gutmann on November 24, 2010
.jpg.aspx?width=75&height=75) With tax season around the corner, many households will be wondering how to pay for the amount they owe Uncle Sam. The good news is that you won’t have to fork over your tax bill in cash, since many tax filing services allow you to pay by credit or debit card instead. However, there is an additional fee associated with using these services. In addition, paying with plastic only slightly delays the need to pay up in full, and so the main benefit is one of convenience.
If you’re thinking of using a debit card linked to a bank account, keep in mind that if you file your taxes online, you can simply provide account information, usually at no extra cost. Turbo Tax is the best place to start if you are looking for a free way to file your federal taxes over the Internet. Extra charges apply for state returns, and their basic service is only appropriate if your financial situation is fairly standard.
However, if you would rather charge your taxes to your credit card, giving you a few more weeks before paying the bill, it’s important to realize that the fee will depend on the amount you owe. If you owe a very large amount, the fee is going to be substantial. The IRS has created a list of service providers that allow electronic payment via credit card, which includes the current fee structure. You can look on the website of your preferred tax service to get more information, but most fees are between two and four percent of what you owe.
If you are forced to pay by credit card, one small side benefit might be accumulating credit card points, cash back, or airline miles, if your credit card is associated with such rewards. So, if you have to pay a hefty sum in taxes, at least you might get a free flight out of it! Furthermore, both business & individual taxpayers can count the extra fee as a deductible expense. If you are paying a fee as part of an individual tax payment, “taxpayers may deduct the fee as a miscellaneous itemized deduction subject to the 2% limit on Form 1040, Schedule A”1.
Source:
1 http://www.irs.gov/efile/article/0,,id=101316,00.html
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