Have you ever worried about paying a tax bill before? Whether it’s a hundred dollars or several thousand, owing unexpected taxes can throw a wrench in almost anyone’s budget. However, if you’re faced with a tax liability that you can’t pay immediately, the IRS lets you pay with a credit card.

To pay your tax bill with a credit card, you’ll need to go through one of the IRS-certified service providers, which are conveniently listed on the IRS website. Service providers accept payment over the phone or Internet, and they charge fees based on the amount of your tax bill. Integrated online payment options are also available through various e-file and e-pay service providers. Your fee will be a percentage of your tax bill if you choose this route, too.

While credit cards charge interest, those rates may be less than paying the penalties and late charges imposed by the IRS. The late-payment interest rate that the IRS charges is equal to the federal short-term rate (which is determined each quarter) plus 3 percent. The interest charges generally begin to accrue after the tax-bill due date.

On top of interest payments, late taxpayers are charged a penalty of one-half of 1 percent (0.5%) of the outstanding amount owed each month (or partial month). That rate rises to a full 1 percent if the tax remains unpaid ten days after the IRS issues a “Notice of Intent to Levy,”, but it can drop to one-quarter of 1 percent (0.25%) for taxpayers who file by the return due date and have an installment agreement in effect.

In any event, the late-payment penalty is capped at a maximum of 25 percent of the unpaid tax bill, but both the interest payment and the penalty charge will continue to build up until the tax bill is paid off in full.

If you’re thinking about applying for a credit card to pay your taxes, you may want to consider checking your credit reports and scores. Since credit card companies tend to give better rates to borrowers with good credit, it’s in your best interests to know what’s in your credit history.

Have you ever paid your taxes late?  If so, what sort of financial damage did you face as a result?

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