Can Payroll Taxes Be Put on a Credit Card?
By law, employers must withhold income taxes, Social Security and Medicare taxes, and submit taxes to the Internal Revenue Service on behalf of their workers. These taxes must be paid quarterly, using a Form 941, and are usually deposited directly from an employer's bank account, either by check or an electronic transfer, using the IRS's Electronic Federal Tax Payment System online. As with personal taxes, employers may make payroll taxes through credit cards, though most use a third-party vendor to broker the payment.
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Credit Card Payment Options
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The EFTPS system only allows for electronic funds transfers from bank accounts, so employers must turn to e-pay service providers to meet payroll tax requirements using a credit card. Three companies, which operate six separate services, allow business owners to make payments using a credit card through the Internet or via a telephone-brokered transfer. Companies charge convenience fees that range from 1.9 to 2.35 percent of the total tax bill to use credit card transfer options. Interest charges may accrue on payments made on unpaid balances.
Debit Card Payments
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Business owners with large payroll tax balances may save on surcharges by making payments using an ATM card or debit card. Processed by the same companies that offer credit-card payment options, most debit-card based payments are assessed with flat service charges of a little less than $4 for most providers. One provider offers debit-card payments for a 1.9 percent surcharge. Debit card payments are more affordable than credit card payments to employers if they must pay $200 or more each quarter in taxes.
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Borrowing Against Payroll Taxes
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When an employer collects payroll taxes from his employees, he must place those funds in an account and hold them until submitting his tax payments. It's illegal for employers to use payroll tax collections for any purpose other than paying the IRS. Employers who borrow against payroll tax balances may be held personally responsible for misuse of tax funds in the most flagrant misuse of these funds. Employers who use payroll taxes improperly may face civil and criminal charges. Because of this, employers shouldn't need to resort to placing payroll taxes on credit cards to meet their tax requirements.
Traditional Payment Methods
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Employers who don't want to use credit cards and invoke additional charges when they pay their payroll taxes may pay the IRS directly. Payments may be made by submitting a Form 940 and a check to the IRS each quarter if they owe less than $1,000 each payment period. All employers may make payments using the EFTPS system, either online or over the phone, using electronic funds transfers from a bank account.
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