Accounting Best Practices, Fifth Edition

13–21. Pay Taxes with a Credit Card

When companies find themselves in a difficult cash flow situation, they may have difficulty making tax payments, which must be paid by very specific filing dates. Since the government penalties imposed on late payments are considerable, it is rarely advisable to delay a payment.

An option that mitigates this cash flow problem in the short term is paying taxes with a credit card. While government entities rarely accept credit cards, this option is available through the Official Payments Corporation (www.officialpayments.com). This company accepts Visa, MasterCard, American Express, and Discover card tax payments for taxes due to the federal government, 26 state governments, and the District of Columbia, as well as about 2,000 other tax jurisdictions. In exchange for this service, Official Payments charges a service fee of about 2.5%. This charge is tax deductible as a business expense.

As an example of how the process works, a user accesses the Official Payments Web site or calls its automated phone service at 1-800-2PAY-TAX, and selects the type of tax to be paid, which can be either federal income taxes, state income taxes, state sales and use taxes, or local personal property taxes. The user then enters the tax identification number of the company for whom the payment is being made and credit card payment information, and receives a confirmation number from the system. Official Payments then forwards the payment to the selected government. ...