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When paying taxes with a credit card may be worth it

March 3, 2014
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credit cards When paying taxes with a credit card may be worth it

It’s tax season, friends

It’s about that time of year again, where the IRS comes a knockin’ and businesses and professionals alike must pay up, but sometimes well-laid plans go awry, and there is a scramble. NextAdvisor.com Editor, Julie Myhre says there are times when it is appropriate, or even beneficial to pay your IRS bill with a credit card.

Myhre outlines some scenarios below not only when you should pay taxes with a credit card, and which cards are the most advantageous to use.

bar When paying taxes with a credit card may be worth it
In her own words below, Myhre offers advice on when paying taxes with a credit card may be worth it:

Avoiding interest from the IRS

If you’re unable to pay the full amount owed to the IRS, but will be able to pay the balance within 18 months, then it may be best to pay the balance with a credit card.



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While you can set up a payment plan with the IRS, you can expect to pay 3% per year in interest, which can easily amount to as much as 10% per year when you include the penalties and fees that you’re required to pay in order to set up the payment plan.

Best Introductory APR: Citi Simplicity Card

With the top 0% APR credit cards, such as Citi Simplicity Card, you can get a 0% APR for the first 18 months of being a cardholder, which can allow you to avoid paying any interest on your taxes if you pay off your balance within 18 months.

Many credit cards even combine the 0% APR with great rewards, such as Chase Freedom, which allows you to earn cash back on every purchase. That being said, if you’re going to need several years to pay off the IRS debt, then working directly with the agency to set up a payment plan may be the best option for you because the IRS could provide you with a low long-term interest rate.

Earning rewards while you pay

If you have a premium rewards credit card and will be redeeming your rewards soon, then you may want to consider paying the IRS with a rewards credit card. Most rewards cards aren’t going to give you the equivalent of 1.88% cash back on your purchases, however some will.

Best Rewards: Barclay Arrival World Mastercard

For instance, the Barclay Arrival World Mastercard gives you 2% on all purchases, which is equivalent to 2.2% cash back with its 10% redemption bonus that allows you to get an additional 10% point bonus when you redeem your rewards for travel. It also gives you a 0% introductory APR for 12 months, making it a solid option if you can’t pay the totality of your IRS debt right now. The Barclay Arrival World Mastercard also provides you with the equivalent of a $440 introductory bonus after you spend $3,000 in the first three months of card membership.

Another rewards credit card that also gives generous rewards is the Capital One Venture Rewards Card, which earns you 2% on every purchase as well as gives you the equivalent of a $200 introductory bonus when you spend $2,000 on purchases within the first three month of being a cardholder. According to our travel rewards analysis, you can earn the equivalent of more than 2.5% back when you redeem your points for Starwood hotel stays with the Starwood Preferred Guard credit card, allowing you to come out ahead using this card. It also has a 25,000 point introduction bonus — 10,000 after your first purchase and another 15,000 after you spend $5,000 within the first six months of card membership.

Paying the IRS with a credit card may not seem like an ideal option, however there are instances when it makes the most sense. Read through our complete credit card reviews to learn more about the variety of cards available as well as find the best credit card to pay your IRS debt. Haven’t filed your taxes yet? Use the best tax preparation service (reviews, comparisons here) to make sure you get the most out of your tax return.

Marti Trewe reports on business and technology news, chasing his passion for helping entrepreneurs and small businesses to stay well informed in the fast paced 140-character world. Marti rarely sleeps and thrives on reader news tips, especially about startups and big moves in leadership.