Each and every year, after we fill in our tax returns many of us discover that they owe money to the Internal Revenue Service. Here what Sean Bryant of Credit.com suggests people to do.
In 2017, we had until April 18 to figure out how to pay taxes. In really tehre is no way to lower our tax bill at this point. A proper planning could lower it for next tax year however.
No we need to decide whether to pay what is due to IRS by credit card? We can do that. By doing so we could actually benefit by such form of tax payment, if we use a rewards card. There are few things to consider, however.
Should We Use A Credit Card?
If we have the money to pay the taxes in cash, why not pay them by credit card an earn some rewards. Any tax bill that accounts at thousands or ten thousands of dollars is a very a good opportunity to earn rewards. However, if we are about to use a credit card to pay your taxes simply because we are out of money, there is a better decision. It is to call the IRS and to get a tax payment plan. Avoid paying taxes might have serious consequences on our finances, including our credit score.
The IRS processes payments with three different payment processors. They impose up to 2% processing fees. So we need to make sure that we have earned enough about the fees these payment processors are about to charge. Some rewards cards offer 1.5% or even 2% cash back on purchases. It still might be not enough to cover the processing fees, however.
Use An Existing Credit Card
If we do not have a rewards card and do not want to get a new credit card, we might use an existing credit rather than paying what’s due through a checking account. A good reason to use a credit card the grace period from the moment when we you charge, to the moment when we have to pay it. On some occasions we might delay a payment with 2 months without incurring an interest rate.
Getting A new Card
There are a lot of options for new credit cards and many of them come with nice promotional offers. It would be financially beneficial to apply for one. Chase Sapphire Preferred card for example offers a 50,000 point signup bonus if we spend $4,000 in the first three months. So, if we get approved for a new credit card and then, for example, pay a tax bill anywhere between $4,000 – $5,000, it is very likely that we’d end up with some earnings.
The rewards would be exchanged for cash or if we plan to travel, then the rewards earned will buy even more. I’m a long term Chase customer and the rewards I ran help me a lot to pay for my airfare I booke through Chase Ultimate Rewards service.
If We Cannot Pay Right Away
If we cannot afford to pay off the balance due on the credit card used, in case we need to use it for tax bill, then a card with an introductory 0% APR on balance transfers or new purchases is a very good option. There are many cards that come like that.