Why It?s Better to Owe Taxes Than Pay with a Credit CardPublished:
If you owe a whole chunk of change to the IRS, then you may be thinking about putting all that money on your credit card. Although the IRS does offer payment plans to pay it back, this requires talking to the IRS to work out an agreement. Plus, the IRS charges interest. However, it might not be the best idea to pay taxes with a credit card, either.
Credit Card Interest Issues
Again, the IRS charges interest on your taxes when you set up a payment plan. However, you must also take into consideration the interest on your credit card. Many taxpayers will pay taxes with a credit card that has 0% APR for a limited time. The hope here is they will pay off their amount due in time before the interest kicks in.
However, to pay taxes with a credit card can be dangerous. If you don’t actually get your payments done in time, you may end up owing way more than your initial taxes. This would be made even worse if you skipped a payment.
Paying taxes with a credit card can also be a big problem when choosing your payments. You have a better chance of choosing the amount and time to pay back your taxes when you go with an IRS payment plan. They’ve actually got the program set up specifically for this. While its true that you have to do a little more initial work up front to set up an IRS payment plan, as opposed to just quickly paying your taxes with a credit card, it’s also true that that work will more than likely pay off in less interest paid and a more lenient payment plan.
If you set the plan up correctly, and don’t agree to pay more than you actually can, then you’ll be better off in the long run than if you paid your taxes with a credit card. It is possible you could end up paying a little more in interest, but the risk isn’t worth it.