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5 Reasons You Should Not Pay Taxes with a Credit Card

5 Reasons You Should Not Pay Taxes with a Credit Card

Thinking whether you should pay taxes with a credit card instead of setting up a payment plan? You may want to reconsider. There are several reasons why this is a bad idea. Here are the top five.

1. IRS Payment Plans Are Flexible
Setting up an IRS payment plan gives you the option to choose how much you want to pay each month. You know your monthly expenses better than anyone else (except maybe your accountant, if you have one) so this is a great option to have.

Your credit card company will not be so lenient if you pay taxes with a credit card. When’s the last time your credit card company asked you how much and when you wanted to pay them back?

2. Higher Interest
While the IRS does charge interest on your taxes when you set up a payment plan, you may end up with higher interest when you pay taxes with a credit card. Often this is because people will use a new card to cover the high expense. The hope is the introductory period will be enough time to finish paying the taxes off. However, this could easily backfire and leave you with really high interest.

3. Missing a Payment
While missing a payment is never a good thing, you may find you have a bit less leniency when you pay taxes with a credit card. The IRS will of course not be happy about the missed funds but you should be able to speak with them about what happened. If you miss a payment with your credit card, you’re automatically going to be paying that super high interest you were trying to avoid.

4. 120 Days
Did you know the IRS has it set up where if you can pay your taxes back within 120 days you don’t acquire any fees or interest? This is very handy if you have just a little bit of taxes that you can’t quite pay immediately.

If this is the case for you, then there is no reason to pay taxes with a credit card. Doing so would just cause more worry and fret about messing up your credit. Simply pay it all within 120 days and you’re covered.

5. You Owe a Bunch
Do you owe an exorbitant amount of money to the IRS? Not only will you possibly have trouble trying to pay taxes with a credit card, it’s probably just a better idea to set up a payment plan. The reason for this is the plan can last up to three years.

If you owe a large amount, you are probably better off working closely with the IRS, especially if this is a one-time tax situation. There’s a low chance you would pay the credit card off in time and a payment plan would require working with the IRS up front, but would end up being way less stressful in the long run.

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