Pay Your Income Taxes With Plastic

When tax day rolls around each year, what do you do if you don't have the money? It would be nice to be have to option to charge taxes owed when you get it a bind.

The day has arrived: You can use your credit card to pay your federal income taxes and some state's taxes. This is not a test or pilot program. It's available now. But is this a good deal for you or your clients?

Here's the story. Under the credit card system, you may dial a toll-free number (1-888-2PAYTAX) and charge any balance due (up to credit card limit, of course) using most major credit cards (Visa does not qualify, yet). You'll have to pay for this privilege, but you won't pay the IRS. You'll pay the company that has the contract to run the payments "Official Payment Inc." It will pay the fees over to the credit card companies.

Which States Allow Payment By Credit Card?

Twenty-one of the fifty states have also signed up with Official Payment, Inc. to accept tax payments. To see if your state qualifies dial the number above and select 2. You will be asked for your zip code.

When you call in and make your payment, you will get a confirmation number. You will also be able to use a second toll-free number so that you can call the IRS to see whether it received your payment. It will probably take about five days from the time you initiate the transaction for the IRS to actually receive your payment. Official Payment has built the system to handle the flood of calls around the April 15 filing date. And it has developed a system to "time stamp" your call to determine whether you've made a timely payment.

Limits On Who Can Pay Via Credit Card

Presently, the credit card payment feature is only available for individual returns, personal extensions, and personal estimated payments (e.g., Forms 1040, 4868, 1040ES).

A good deal? It may make better sense --if you can't afford to pay your entire tax due--to file your return and enter into an installment agreement with the IRS. Under this method, you'll get hit with a failure-to-pay penalty of one half of 1 percent of the tax not paid, for each month (or part of a month) that a tax balance due remains unpaid (up to a maximum of 25 percent). The IRS will also charge you interest on under-payments (currently 8 percent per year).

What if you want to go the installment route, but you have enough credit on your cards to pay the bill? The IRS says this will not affect an individual's ability to enter into an installment agreement. However, an installment agreement is generally allowed at the discretion of the IRS--and if the IRS determines the individual is unable to pay in full.

Reward Yourself

If you pay your taxes with a credit card, it will also give you frequent flyer miles or other rewards offered by your credit card company! Who knows? Your next vacation might just be on the government. If you felt that Uncle Sam took you for a ride, you can turn the tables and get a ride on him.

Payment of taxes with a credit card is just one aspect of taxes that many taxpayers and tax preparers alike don't always think of. Because tax preparation proves a complex topic worthy of its own study, the Professional Tax Preparer certification was created. Also, in addition to keeping your own tax burden low, small businesses are eager to get help with their tax filing and forms. Willing enough to pay you over $100/hour preparing their taxes.

Learn How to Make Great Money Preparing Individual and Business Income Tax