Using Plastic Adds to Tax Bill

If you're strapped for cash come April 15, you can use your credit card to pay your 2007 tax bill and to pay estimated taxes for 2008, but you'll pay dearly for the privilege. The company that

5%—Percentage of Americans who say it’s okay to cheat the IRS “as much as possible.”(Wall Street Journal, 2008)

If you’re strapped for cash come April 15, you can use your credit card to pay your 2007 tax bill and to pay estimated taxes for 2008, but you’ll pay dearly for the privilege. The company that processes your tax payment will tack on a “convenience fee” of 2.5% to 3% to your total tax bill. Although it may be tempting to earn more miles, points, or cash-back rewards by paying your tax bill with plastic, the surcharges can add up to add up to serious money, wiping out the value of any additional perks you earn. It gets even costlier if you don’t pay off your credit card bill in full at the end of the month and start adding double-digit credit-card interest to the fee.

The IRS accepts several kinds of plastic, including American Express, MasterCard and Discover (Visa does not participate). It will also take payments by debit card, but that makes almost no economic sense. Since the money comes out of your checking account right away when you use a debit card, it’s just like writing a check. For information on how to pay taxes with plastic go to the IRS web site on e-filing.

“Alexander Hamilton started the US Treasury with nothing and that was the closest our country has ever come to being even.”—Will Rogers