Q. Should I use credit card to pay last year's tax due in order to avoid penalty?
A. Generally you shouldn't do it.
The late tax payment penalty is only one-half of one percent per month (6% per year — up to a total of 25%). However, if you file an extension, you won't be charged for such failing to file penalty. The interest rate on the balance due is only 3% per year.
So, if you pay off the entire balance due no later than Oct. 15, your costs will only be 4.5% of the total balance due. Much less than interest rates from loans or credit cards.
If you pay via the installment agreement — the same interest and penalty rates apply.
Naturally, if at all possible, avoid owing the IRS and your state money. They have easy ways of tapping into your accounts when you miss payments. Lenders don’t have those tools. They just charge you late fees.
A. Generally you shouldn't do it.
The late tax payment penalty is only one-half of one percent per month (6% per year — up to a total of 25%). However, if you file an extension, you won't be charged for such failing to file penalty. The interest rate on the balance due is only 3% per year.
So, if you pay off the entire balance due no later than Oct. 15, your costs will only be 4.5% of the total balance due. Much less than interest rates from loans or credit cards.
If you pay via the installment agreement — the same interest and penalty rates apply.
Naturally, if at all possible, avoid owing the IRS and your state money. They have easy ways of tapping into your accounts when you miss payments. Lenders don’t have those tools. They just charge you late fees.
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