To Charge Or Not To Charge?
Credit cards become more popular as option to pay taxes
For Immediate Release: April 7, 2005
ROCKVILLE, Md. — As many American families fail to save for large expenses, credit cards are often the saving grace for paying large unexpected bills. But while the expenses that end up on credit are often car repairs, home repairs and medical costs, more and more Americans are turning to their credit cards to pay their taxes. According to the Internal Revenue Service, more than 950,000 taxpayers used their credit cards to pay their taxes in 2004, up 70 percent from 2003.
"When facing a large tax bill it can be tempting to pull out the plastic, but make sure you explore all of your options before charging your taxes," said Steve Rhode, president of Myvesta, a nonprofit consumer education organization. "Not only will you have to pay high interest fees charged by your credit card issuer if you don't pay the balance off immediately, but the companies who process the IRS credit card payments will charge you an additional 2.49 percent of your tax bill. If the amount you owe to the IRS is large, that could add a significant amount to your tax liability."
According to Rhode, the IRS offers other options that should also be considered when you cannot afford to pay your tax bill in full.
"If the convenience fee for using your credit cards to pay your taxes is more than the $43 the IRS charges to set up an installment plan, consider working with the IRS to pay your taxes over time," Rhode said. "If you don't think you can afford to pay off your credit cards or keep up with an installment plan, look into an offer in compromise where you can settle your tax liability for less than you owe."
For a comprehensive look at all the options available for paying your taxes, read the Myvesta publication "How to Deal with the IRS If You Can't Pay Your Taxes." It can be downloaded free online from Myvesta.org.
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MyvestaSM is dedicated to helping people create healthy financial lives. The organization provides a wide range of materials to inspire and inform people so that they can break down their barriers to financial and personal success. For more information visit Myvesta.org online.
