Don't Pay Extra to Pay Your Taxes

How should you settle up with Uncle Sam if you’re one of the 40 million or so taxpayers whose 2014 returns show that you owe the IRS more money?

You could, of course, do the old fashioned thing and write a check. If you do, make it out to the U.S. Treasury, so a crook who intercepts it can’t change "IRS" to "MRS. JOHN JONES."

If you use tax software and file electronically, you can tell the IRS to dip into your bank account for the amount due. If you choose the direct debit option, you can file as soon as your return is done and tell the government not to take the money until the April 15 due date.

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Another choice is to pay your bill with a credit or debit card. You’ve probably heard the stories about high-rollers paying huge tax bills with credit cards in order to rack up frequent-flyer miles or other incentives. And, for a select few, that might actually make sense. For the rest of us, it’s simply a way to be unnecessarily parted from our money.

Since Congress won’t pay the servicing fee that card issuers charge, a third party has to handle the deal. And, of course, that firm has to be paid. You’ll get nicked a flat $2.50 to $3.50 or so if you use a debit card. The cost for using a credit card depends on how much you charge – from 1.87% to 2.35% of the amount. That could be almost $120 to charge a $5,000 tax bill. And remember, that's in addition to the interest you’ll pay. You’re best off using a debit card or paying with a check.

For more advice on preparing your federal tax return see our Special Report on Tax Prep & Filing.

McCormally retired in 2018 after more than 40 years at Kiplinger. He joined Kiplinger in 1977 as a reporter specializing in taxes, retirement, credit and other personal finance issues. He is the author and editor of many books, helped develop and improve popular tax-preparation software programs, and has written and appeared in several educational videos. In 2005, he was named Editorial Director of The Kiplinger Washington Editors, responsible for overseeing all of our publications and Web site. At the time, Editor in Chief Knight Kiplinger called McCormally "the watchdog of editorial quality, integrity and fairness in all that we do." In 2015, Kevin was named Chief Content Officer and Senior Vice President.