It’s that time of the year again. The tax man is calling and more than ever before, Americans are turning towards plastic to pay their tax bill. According to the IRS, as of March 31 of this year, nearly 800,000 taxpayers have paid more than $450 million in taxes with a credit card, totals representing an increase of over 40% from the same period last year.

What’s behind this shift? Well, it appears that convenience is the overriding factor. The electronic conveniences offered by the IRS of E-filing, direct deposit and credit card payments have all seen increases in utilization. As of March 31, 67% of returns had been e-filed compared to 65% at the same time last year, and 67% of all refunds have been issued via direct deposit, up from 63 percent of the total for the same period last year.

And then there are the incentives that credit card issuers are offering. In addition to the usual cash back or mileage awards that many credit cards offer, card issuers have come up with a myriad of other incentives to tempt you into charging your tax bill. (See the table at the end of this article for a list of some of the incentives being offered up.)

While it seems like a really easy way to rack up a whole load of credit card points, it turns out that it is almost never a good idea to put the tax bill on plastic. Not yet, anyway. And the primary detracting reason is because of fees. The two companies that the IRS has contracted to handle credit card transactions, Official Transactions Corp. and Link2Gov Corp., charge a 2.49% convenience fee on all tax payments. That fee, in nearly all cases, will more than wipe out any benefits accrued by using your card.

Consider, for example, the Starwood American Express Card, which earns Starpoints for every dollar spent. Many people consider each Starpoint worth in the neighborhood of two to three cents. Using that assumption, earning double Starpoints for your charging your tax bill then would essentially end up being a wash. Most people, however, would probably prefer cash in hand versus the Starpoints equivalent.

Then there is the ever present danger of accumulating more debt than you can handle. If you are having trouble paying your bills to begin with, charging your tax bill only serves to put you further in the hole. With credit cards having regular interest rates that start in double digits and quickly increasing with any sign of default or deliquency, if you are unable to make timely payment of your tax bill, you will probably be better served setting up an installment plan with the IRS rather than putting your tax bill on your credit card.

Credit Card Incentives For Charging Your Tax Bill

Card	Incentive	Fine Print
American Express Business Gold Rewards	$200 credit	The offer applies only to new accounts, and payments must be made through Official Payments by June 30.
CitiBusiness AAdvantage	15,000 bonus miles, one mile per dollar charged, and no annual fee the first year.	Bonus miles apply only to new accounts but not to your first purchase. The bonus expires June 30, and miles are capped at 150,000 a year.
Delta SkyMiles	Two miles for every dollar of federal tax charged.	You get only one mile per dollar for charging state or property taxes; rewards for SkyMiles Options accounts are lower. Rewards are capped at 30,000 to 100,000 miles, and they don’t apply to the convenience fee. Payments must be made by April 17.
H&R Block	One deal waives the 2.49 percent convenience fee entirely, one waives the fee on just the first $350 you pay (a maximum of $8.72), and another cuts the fee to 1.99 percent	You must complete your federal return through H&R Block Online and pay the taxes you owe through www.pay1040.com. Different deadlines and terms vary depending upon whether you use a debit or credit card or a Visa or MasterCard.
Hilton HHonors Platinum	Three HHonors points for every dollar of federal, state and local taxes charged.	The reward does not apply to the convenience fee. Redemption restrictions may apply.
Starwood Preferred Guest	Two points for every dollar of federal tax charged.	The reward applies only to personal federal tax payments, you can earn no more than 5,000 points, and the offer doesn’t apply to the convenience fee. Deadline: April 17.
Official Payments	The convenience fee is cut to 1.99 percent.	You must make your payment through www.officialpayments.com/mcfeeoffer.jsp and charge your federal personal tax bill on a MasterCard by April 17.
TurboTax	A 15 percent discount if you use TurboTax Online.	You must access TurboTax Online through www.officialpayments.com, e-file and charge your tax bill through Official Payments. The offer expires Oct. 15.
United Mileage Plus Signature	Two miles for every dollar of federal, state and local taxes charged, plus 30 percent off the TurboTax Online fee to prepare your federal 1040.	Delinquent customers don’t qualify. You must go through www.officialpayments.com and pay with your United card. The TurboTax discount expires Oct. 15; the mileage reward expires Dec. 31.
This table’s data is courtesy of the San Jose Mercury News.