You can pay off your tax debts by using a credit card as a short-term loan and pay the credit card bill later. Before paying the IRS debt with your credit card, make sure that your credit limit can include the amount of the tax debt to avoid interest, fees and penalties. You can pay taxes with your credit card, but there are generally fees. At a minimum, there will be a payment processing fee that will range from 1% to 2%.
The IRS breaks down the fees for each payment processor here. Choose the payment processor below that offers you the best fees depending on the type of card and the amount of the payment. Paying taxes with your credit card is not recommended, as it involves processing fees and the possibility of paying interest if you can't pay the balance right away. Penalty for not filing your tax return: If you don't file your taxes, you will be charged a fee of 5% (up to a maximum of 25%) for each month your return is late.
The IRS page that explains credit card payments says that you can only use debit or credit cards to make up to two payments per tax period (year, quarter or month, depending on the type of taxes you pay), but that means that you can use two different cards to make two different payments. Several credit cards allow you to increase your elite status or gain status directly by spending on a credit card. In addition to payment processing fees, your credit card will charge you interest, unless you pay off your balance at the end of the billing cycle (an average of about 15.78% according to the most recent data from the Federal Reserve). You may be able to pay off your credit card debt through Chapter 7 bankruptcy, but tax debt is nearly impossible to pay off.
That sounds pretty good compared to the 5.57% you would pay for a tax debt, but there are additional fees and penalties to weigh when you can't pay your taxes. At the time, Patrick had some money saved up, but he didn't want to exhaust his emergency fund to pay his tax bill. For example, you may have to exceed a minimum spending limit to get the welcome bonus with a new card or get a cost-based advantage, such as miles that qualify for the elite with an airline card or a free night with a hotel card. This is especially important to consider when card issuers are tightening the requirements for new credit cards.
Despite the benefits mentioned above, using a credit card to pay your taxes can be an unwise strategy, since the interest rate on most credit cards with rewards can seriously damage your finances if you have to pay them. Amex Rewards Checking debit card information has been collected independently by The Points Guy. If you're thinking about using a credit card to pay taxes, be sure to review the APR offer and map out your debt repayment plan. Basically, putting your taxes on the right credit card can help you earn valuable extras, such as promotion to elite status, rewards for free nights, and more.
You can pay off a personal loan in just a few months or up to three years, and sometimes even longer.