Suffolk Accountants Diapoules & Feinstein, CPAs P.C., Weigh in on Using Credit Cards to Pay for Taxes

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Is cash or credit better for paying taxes? Diapoules & Feinstein comment on the issue.

On February 28, Suffolk accountants Diapoules & Feinstein, CPAs P.C. issue a response to an article from Market Watch that asks whether it's preferable to pay your taxes with cash or credit.

Charging your taxes to a credit card can certainly be a more convenient way to pay them – but is it worth it? According to the article, something you need to consider when using a credit card is the convenience fee, which “amounts to a hefty 1.89%, 1.89%, or 2.35% of the amount you charge, depending on the payment option.” This charge is put in place in lieu of the price that merchants pay when you use a card at stores.

While this may not be a deal-breaker if your tax bill isn’t too high, those of us that are paying a few thousand in taxes for last year may have a different view. The article points out that a $5,000 tax bill could end up earning a convenience charge of as much as $117.50. In this case, paying in cash is a much better option.

You may also be qualified to set up a payment plan with the government, in which case you will have to pay a $52 setup fee (which may still be cheaper than the convenience fee) on top of interest, reports the article. (Keep in mind that interest rates are subject to change every quarter.)

“If you unfortunately owe thousands of dollars in tax, you should seek the help of a tax profession to ensure that your taxes have been prepared properly and also to discuss what your best payment options would be,” responds Jim Diapoules of Diapoules & Feinstein, CPAs P.C. “Your first option should be to request an installment payment plan as it most certainly be less expensive than using a credit card. Other benefits in making an installment agreement with the IRS are that the funds will be automatically withdrawn from your bank account, the amount of the payments is constant and term of the agreement is usually less than 12 months. ”

Diapoules & Feinstein have been providing accounting, auditing and tax services to Greater New York City area since 1989. D&F provides our clients with great personal attention and years of professional experience in order to see them succeed and help them to feel confident.

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Jim Diapoules
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