Columbia, Maryland (PressExposure) April 07, 2009 -- National Financial Awareness Network President John Janney is urging taxpayers to resist paying taxes with their credit cards and encourages those who owe taxes but can't afford them to look into installment plans instead.
Janney said that taxpayers planning to pay their taxes with credit cards should know the service providers that process the transaction charge a fee of up to 2.49 percent of the transaction amount. For example, if you owe the IRS $2,000 in taxes, you will pay the service provider an extra $49.80 to use your credit card.
âCharging your tax bill to your credit card may seem quick and easy, but it doesn't necessarily mean that it will be painless,â said Janney. "Besides the 2.49 percent fee you'll end up paying, you'll be paying your credit card account's interest rate on those taxes and that could be as high as 40 percent."
Nearly 2 million taxpayers paid their federal taxes by credit card in 2006, up from about 1.5 million in 2005, which was a 54 percent increase from the previous year. Many state tax revenue offices also allow taxpayers to pay taxes by credit card.
"Federal and state tax revenue services offer installment plans for taxpayers who cannot afford to fully pay their taxes when due," Janney explained. "These installment plans usually carry a much lower interest rate than what credit card companies charge, so it just makes good financial sense to pursue that route first."
The IRS provides information on the features of paying taxes via a credit card on their website: [http://www.irs.gov/efile/article/0],,id=101316,00.html. Information about tax installment plans is also available on their website: [http://www.irs.gov/businesses/small/article/0],,id=108347,00.html.