Paying Tax Debt with Credit Cards is an Option

The deadline to file and pay federal income taxes has been extended to July 15, 2020 due to the coronavirus outbreak. With this extension, those who have not yet filed may consider the options they have to pay their taxes.

Taxpayers can pay their tax bill using debit card or credit card. However, employers’ federal tax deposits cannot be paid by card. It can only be paid using electronic funds transfer (EETPS).

For others, whether you are paper filing, e-filing or responding to a tax bill or IRS notice, you can easily pay what you owe using your debit or credit card. Those who owe $100,000 or more need to coordinate with a service provider to make the payment.

Credit Card Insider conducted a survey to find out how many taxpayers use credit card to pay taxes. ClickOrlando shares the results:

“Using SurveyMonkey to conduct an online survey of 3,114 adults from Feb. 3-5, Credit Card Insider found out the following information when it comes to how important credit cards are for people during tax season.

• 14% of respondents who expected to owe this year planned on using a credit card to pay their taxes. And 21% of respondents that have owed taxes in the past said they’ve paid with a credit card.
• 58% of people planning to pay taxes with a credit card indicated they were doing so in order to earn rewards or introductory bonuses. However, people who decided to do that have to research whether the rewards gained would be more than processing fees for credit card payments.
• Of those expecting a tax refund, 40% had credit card debt. 75% of those with debt plan to use their tax refund toward paying it off.
• 37% of respondents planning to pay with a credit card this year indicated it was because they didn’t have the funds to pay otherwise.”

*This survey was conducted before extension to file and pay was announced.

When paying by credit card, taxpayers may keep in mind the processing fees and their existing credit card debt, if any. Those who are expecting big refunds can file early so that they can receive their refund quickly.”