It's tax season, and when taxes come due, many people wonder if they should pay their taxes with a credit card. If you're unsure whether putting your taxes on a card is a good idea, here are the pros and cons of doing so to help you make the best decision.
What is the benefit of paying taxes with a credit card?
If you owe money to the IRS, using your credit card to pay your taxes can come with some extra perks. Since taxes are typically a large expense, the number of bonus miles or membership points you'll rack up can quickly get you enough that your next vacation could be paid for with points alone.
If you're not planning to travel soon, reward points can also get converted into gift cards or statement credits/cash back, too.
What are the risks of paying taxes with a credit card?
The biggest risk that comes along with paying your taxes with a card is that you'll accrue interest on your debt. This can quickly add up and cause you to pay more in taxes than you would have if you had used cash or another form of payment.
Additionally, if you're not careful, using a credit card to pay your taxes could lead to debt problems down the line. However, there are ways to pay off tax debt if you get stuck in this situation, but it's better to avoid it altogether if you have trouble staying out of debt.
How to pay taxes with a credit card
There are a few different ways to pay your taxes with a credit card. You can pay the entire amount with one payment or pay the amount due over time. In either case, you'll need to find the right credit card to use and make sure that the terms and conditions of the card are compatible with your tax situation.
The easiest way to pay your taxes with a credit card is to use an online service like TurboTax or Intuit. Most services will connect to your bank account and automatically calculate and submit your taxes using your credit card information. This method is quick, easy, and secure.
There's also the option to pay your taxes directly via the IRS website. This is the most traditional way to pay your taxes and requires some extra work on your part. First, you'll need to create an online account with the IRS and calculate your taxes using their online calculator. Finally, you'll need to enter your information into the online form and submit it. This process can be time-consuming, but it's the most accurate way to pay your taxes.
If you prefer to pay your taxes in person, you can do so at your local tax office.
The bottom line
In most cases, it's best to pay your taxes with a debit or check rather than a credit card. However, there are a few situations where it could make sense to use a credit card. The best thing to do is determine whether you'll be able to pay off the additional debt on your credit cards before interest accrues so that you never end up paying more on your taxes than necessary.
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Original Source: Credello: When Should You Pay Taxes With Your Credit Card?
