With April 15 quickly approaching, some Americans are looking forward to a little extra spending or saving money thanks to their tax refunds. People who own their own businesses and freelancers are among those who might not get a refund at all. In fact, you might be counting on to paying the IRS. Recent changes in taxes mean that how much you owe is up in the air if you haven't yet visited your tax man. It's tempting to pay those taxes with your credit card, especially if you're financially strapped. However, is it worth it?
Experts recommend against paying for anything by credit if you can't pay off your monthly bill completely. Of course, this is good advice in an ideal world, but you don't live in an ideal world. In the real world, you might not have enough or any money to pay your taxes with, which is exactly why you're eying up that plastic card peeking out of your wallet. Still, it might be smarter to use the IRS' payment installment plan rather than put those taxes on your credit card.
Saving up a percentage of your earnings is the smartest way to pay off your taxes according to the IRS, and this helps you avoid any fees associated. Fees start at for qualifying candidates, but they go up to 5. This might not seem much, but it can add up if it's in addition to your existing taxes. Still, it's much lower than your credit card interest might be. For example, you'll quick bypass either of those fees if you've got a 4% interest rate on your card and owe ,000. The more you earned last year, the more you'll want to seek out help from the IRS first.
You must apply online to use the IRS installment plan, and there are different forms depending upon how much you owe. The 9465 Installment Plan Agreement Request is required for every applicant, and you'll need to throw in Form 433-F if you owe more than ,000 in taxes. If your tax debt is more than your credit card limit, the IRS option becomes even more appealing. No one wants to spread out their tax debt on multiple credit cards.
It might be worth looking into the hardship program that the IRS provides for taxpayers if you've experienced illness or other extenuating circumstances in the last year that prevent you from paying off your tax debt in full before you charge it. With so many programs available from the government, it makes little sense to whip out your credit card without giving it a second thought.
Of course, if you can afford to pay off your taxes with your next credit card bill, you might earn yourself a fair amount of rewards or frequent flier miles for your next family vacation. This is the one perk of using credit rather than debit, but if you fail to make your payments, you're hurting your credit, too.