The IRS recently inaugurated a brand new option for taxpayers by allowing Federal income tax to be paid by credit card for the first time in history. More than 129,000 people used this option to pay their 1998 taxes, demonstrating the demand for a service that came about through the passage of the Taxpayer Relief Act by Congress in 1997.
You can use the pay-by-phone system to pay the balance owed on a return, pay on a request for an automatic extension of time to file, or make an estimated tax payment.
However, due to a constitutional issue, Congress could not give the IRS permission to cover the merchant fees associated with accepting credit card payments. Instead, those costs are borne by taxpayers in the form of a service charge.
The service charge you pay varies depending on the balance owed-the average range is between 2.5% to 3.5% of the tax payment being made. An exact fee breakdown for this filing season can be found at www.8882paytax.com.
On the plus side, since owing money to the IRS can sometimes take you by surprise, the option of paying by credit card can provide an attractive alternative. If you have not set aside enough to pay the tax by check or money order, or wish to manage your own installment schedule without incurring late fees from the IRS, paying by credit card can quickly satisfy your tax obligation and ease the stress of tax time considerably.
Payments can be made with MasterCard, Discover/Novus, or American Express by calling 888/2PAY-TAX (888 272-9829), an automated phone system operated by Official Payments Corporation. VISA has declined to participate, so VISA cards cannot be used to pay Federal taxes.
Tax time is also a good time to remember to check your credit reports. With a 3 Bureau Online Credit Report, you can verify that your credit information is accurate at the three major credit bureaus with one simple report. You also get a Free Credit Score, complete with personalized analysis and tips to help you improve your credit rating. By checking your credit reports regularly, you can catch possible inaccuracies or fraudulent activities early. Make every tax season a reminder to check your credit report!
Article brought to you by ConsumerInfo.com