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   Charge It: The Growing Trend of Paying Taxes with Credit Cards


Charge It: The Growing Trend of Paying Taxes with Credit Cards

Credit cards are gaining popularity as a way to pay taxes. According to the Internal Revenue Service, the number of people charging their taxes was up 9 percent in 2002, to 313,385 people.

"Charging your taxes on your credit cards can seem like a convenient way to get the tax-man off your back, but make sure you explore all of your payment options before pulling out the plastic," said Steve Rhode, president and co-founder of Myvesta, a nonprofit consumer education organization. "If you're not diligent about paying that debt off quickly, it could cost you a lot more in the long run."

Rhode pointed out that, if a person charges their taxes of $3,000 and only makes the minimum payment on the card, it will take more than 37 years to pay off the initial debt, not to mention thousands of dollars in interest, depending on credit card interest rates.

"If you don't think you'll be able to stick to a payment plan set up by the IRS, using a credit card can make more sense," Rhode said. "Credit card companies do not have as much power in collecting debts as the IRS does, so if you run into trouble it's better to owe a credit card company."

If you are considering using a credit card to pay your taxes, keep in mind that you will have to use a third party payment company, since the IRS does not accept credit cards directly. Two companies offer credit card processing for federal tax returns, and each one imposes a "convenience fee" of 2.49 percent on each transaction. Visit the IRS's Web site at for more information on credit card payments.

Credit cards aren't the only method of paying taxes when you can't afford the full bill. See Myvesta's publication, "How to Deal with the IRS If You Can't Pay Your Taxes," which can be downloaded free online from, or can be obtained as a printed copy by sending $5, payable to Myvesta, to: "Can't Pay Taxes Publication," Myvesta, P.O. Box 8587, Gaithersburg, MD 20898-8587.

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This story was published on April 4, 2003.
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