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Answer:
Dear
Lewis,
Yes.
It's true. You can use your credit card to pay your
taxes, just as you can use it to buy tee-shirts, tweeds
and twills.
However,
I'd think twice about getting out your card to settle
up with Uncle Sam -- even though over 313,000 of your
fellow Americans did so last year. It is an expensive
proposition.
How
it works...
The
IRS has partnered with two companies -- LINK2GOV
Corp. and Official Payments Corp. -- to
process payments taxpayers make either online or by
telephone. You can use one of four cards: American
Express, Discover, MasterCard or Visa. All four charge
a so-called "convenience" fee, typically 2.49% of
what you owe, but it can be as high as 3%.
In
addition, LINK2GOV Corp. handles payments for 20+
states and the District of Columbia, also for a fee.
The cap on the fee is 2.5%.
Although
you'll know what the fee is before you make your payment,
keep in mind that it is in addition to the interest
assessed by the credit card issuer. And, once you
sign on to make a credit card payment, it's almost
impossible to cancel.
When
to use it...
The
only reason I see to use the expensive plastic payment
option is if you don't have cash immediately available
to settle your IRS bill. Don't do it just for the
convenience factor.
And,
it is preferable to taking money out of your retirement
account and being hit with an early withdrawal penalty
plus taxes on the amount withdrawn.
It
may also be cheaper than writing a check against your
credit card account -- if your credit card company's
fees and interest rates for this type of procedure
are higher.
But
if you have cash in your bank account or money market
fund, stash the plastic.
$TIP:
If you do decide to use a credit card, pick one that's
connected to a rewards program. Certain American Express
cards, for example, are co-branded with airlines and
hotel companies. You might be able to get double or
triple rewards points.
More
Information
You'll
find complete details at: www.irs.gov.
Type "credit card" in the search box.
You
can reach LINK2GOV at: www.Pay1040.com
and Official Payments Corp. at: www.OfficialPayments.com.
In
addition, the major credit card issuers provide information
on their websites and through their toll free numbers.
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