The IRS may tell you that it is best to put tax debt on a credit card as opposed to opting for a payment plan. While this may sound like a great idea, you do not want to jump the gun and listen to everything you hear.

There are a few reasons why it is not a good idea to put tax debt on a credit card. They include:

1. A higher interest rate than what the IRS offers. When you put your debt on a credit card you will probably pay more in interest than you would if you were to apply for an installment agreement. This is definitely true if you have bad credit and your interest rate is 15 percent or more. The IRS wants you to put the debt on your credit card so they get paid. Although it may benefit them, it does nothing good for you.
2. Once you move your debt to a credit card there is no way to settle with the IRS. Simply put, this debt is now on your shoulders and the IRS does not care what you do. As noted above, they push people towards credit cards because they get what they, the money. Before you decide on any option, no matter what it may be, you may want to attempt to settle your debt with the IRS. Remember, the moment that you pay with a credit card your chance for settling goes out the window. Do you really want to give up this right just so you can pay a high interest rate?
3. Service fees. The companies that accept credit card payments on behalf of the IRS, such as Link2Gov, are going to hit you with a service fee of 1.95 percent or more. And yes, this is on top of the interest that you will pay to your credit card company. “Paying your taxes with a credit card involves a relatively high fee between 1.95% – 3.93%. As a result, consumers should use a credit card only when they truly lack the money to pay their taxes in full and not for rewards or any other reason,” said Odysseas Papadimitriou, CEO of CardHub.com, a leading credit card comparison website.

These three details should show you why it is best to avoid paying your tax debt with a credit card. Although the IRS may suggest this, it is probably not in your best interest.

If you need help finding the best way to pay the IRS taxes you owe we can help. One service we offer is IRS payment plan help. We will analyze your financial situation and find the best solution that fits your needs, not the wants of the IRS.

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3. What If I Have a Tax Lien on My Credit Report? How Do I Remove?