Biglaw, Law Schools
Here's When You Should Pay Your Taxes With a Credit Card
/var/www/vhosts/lawyersinamerica.com/httpdocs/app/views/singleBlog/singleBlogView.php on line 59">
We're in the final countdown to Tax Day (Tuesday, April 18), which means you should be thinking about filing your 2022 tax return and paying your bill if you haven't already. Most people are eligible to do their taxes for free, and if it turns out you owe money, there are a handful of ways to avoid any processing fees when you go to pay your bill.
If you can front the cash, it's tempting to skip over the pay-by-credit-card option in favor of the IRS' direct pay portal, which deducts directly from a checking or savings account. With a direct transfer, you don't have to send the government a penny more than what you actually owe on your return. But there are a few good reasons to put your tax bill on your credit card this year.
How much does it cost to pay your taxes with a credit card?
The IRS partners with several third-party processors to accept credit card payments, and each charges a different transaction fee:
payUSAtax: 1.85% (minimum $2.69)Pay1040: 1.87% (minimum $2.50)ACI Payments, Inc.: 1.98% (minimum $2.50)This means that if you owe $1,000 to the feds, you'll drop anywhere from $18.50 to $19.80 in fees when you pay your bill with a credit card. Increase the debt to $5,000, and you'll pay nearly $100 extra to use a credit card.
When should you use a credit card to pay your taxes?
Purposely paying a processing fee may seem illogical (and, if you've been following the Ticketmaster saga, enraging), but in some cases, you may gain more than you lose.
According to a breakdown from The Points Guy, there are a handful of credit cards that could net you more than 1% back, and possibly over 2% back, on your tax transaction. If you have a card with a high earning rate (miles or cash back), it may well be worth the fee.
Here are a few general instances when you should consider using your credit card for your tax bill:
Your card rewards outweigh the fee. You need to hit a minimum spend (soon!) to receive your welcome bonus or other card perks, such as free hotel nights or elite airline status. You have an intro 0% APR on purchases, meaning you don't need to pay the bill immediately.However, there are also a few downsides. Putting a big bill on your credit card could land you with hefty interest charges if you carry the balance. Plus, significantly increasing your credit utilization rate could affect your credit score. So keep those things in mind when deciding how to pay this year.
