A Complete Guide To Paying Your Federal Taxes With A Credit Card, Updated For 2021/2022

Updated for 2021/2022. Pay1040 price has decreased from 1.99% to 1.87% for credit & debit card payments. ACI payments has also increased debit card payments to $2.20 from $2

It’s that time of the year again, time to pay taxes! For a lot of people, this is their biggest expense of the year and wouldn’t it be great if you could pay your taxes with a credit card? Well as the IRS website clearly states, you can.

Disclaimer: We’re not accountants, this does not constitute tax advice. Please consult a tax professional.

The Basics

The Tax Payer Relief Act of 1997 allowed the IRS to accept credit & debit card payments (under section 6311(a)) and payments were able to made from January 1st, 1999 onwards due to this temporary act. The IRS has authorized three third party providers to process tax federal taxes on their behalf: Pay1040, PayUSAtax & ACI Payments (formerly Official Payments). The reason why the IRS doesn’t process credit cards directly is they are forbidden from charging fees directly for these services due to other federal laws. None of the money these providers collects goes to the IRS and some of these providers can also be used to pay State taxes (we’ll cover this in another separate post).

In this guide we’re going to assume you have the cash to pay your credit card in full, if you don’t have the ability to do this then paying with a credit card is a terrible idea due to the high interest rates credit cards charge. If you can’t pay in full then you’ll most likely be better off with a payment plan/installment agreement with the IRS, more information on this can be found here.

Obviously all these third party providers charge fees (ranging from 1.9% to 2%), those fees are what we look at first.

Another option is to use the Plastiq bill payment service. Plastiq allows paying any bill, including tax payments, with a credit or debit card.

Fees

Obviously all these third party providers charge fees (ranging from 1.96% to 1.99%), those fees are what we look at first. We’ve also included the fees for debit card payments and digital wallet payments.  According to Way Back Machine, the fees have been very similar for awhile now (actually mostly getting slightly cheaper since 2012).

 Debit CardsCredit CardsDigital Wallet
Pay1040.com$2.58 flat fee for consumer/personal cards and 1.87% for all other debit cards (minimum $2.50)1.87% (minimum $2.58)See debit/credit card fees
PayUSAtax.com$2.55 flat fee1.96% (minimum fee $2.69)See debit/credit card fees
ACI Payments (formerly OfficialPayments.com/Fed)$2.20 flat fee ($3.95 for payments over $1,000)1.98% (minimum $2.50).See debit/credit card fees

There are higher fees if you use any tax preparation software, those can be viewed here.

As for Plastiq, the standard fee is 2.85% for Visa, Mastercard, Discover or Amex.

Making It Worth It

High Cash Back/Rewards Cards

As you can see, Pay1040 is the cheapest option at 1.87%. Even if you used a credit card that earned 2% (e.g Fidelity Visa or Citi Doublecash) you’d only be making 0.13% profit. Even if you had to pay $10,000 in taxes, you’d be earning $200 in rewards but having to pay $187 in fees for a profit of $13. Not exactly worth it. Now if we could reduce our fees, then we might be onto something.

Claiming The Fees On Tax

On the IRS page you’ll notice the following (emphasis mine):

The fees vary by service provider and may be tax deductible

Personal Taxes

Update 2018/2019: Looks like 2%+ miscellaneous deduction option is gone effective 2018.

Nothing like something vague and ambiguous to give to confidence that you can claim these fees as a deduction. In 2009, the IRS introduced a new law that allows some people to deduct these expenses when you file electronically. You can view their statement on this on the official IRS website. Here is what you need to be aware of:

  • Convenience fees associated with payment of federal tax can be included as a miscellaneous itemized deduction
  • Only those miscellaneous expenses that exceed 2% of the taxpayer’s adjusted gross income can be deducted

You can view what the IRS considers a miscellaneous expense here. But for most people I doubt they will exceed 2% of their adjusted gross income. So there goes that idea.

Business Taxes

Things are a little clearer for business taxes, they state:

  • For business tax types, the fee is a deductible business expense.

Meeting Minimum Spend Requirements

As easy manufactured spending methods dry up, more and more people are happy to pay a fee to meet minimum spend requirements. That’s because they usually have large sign up bonuses relative to the minimum spend requirements.

Splitting Payments

If you owe $10,000 in taxes, then chances are you don’t want to be paying $187 in fees just to meet one minimum spend requirement (especially since most of them only require ~$3,000 or less in spending). Thankfully the IRS allow you to split your payments up, how many times you can do this depends on what sort of tax you’re paying. They provide a full table here.

If you use Plastiq, there is no limit to the amount of payments you can make. You’ll pay with a card, but each payment will be sent to the IRS via mailed check. The limits given by the IRS are only for card payments, not check payments.

Our Verdict

I think paying your taxes with a credit card is generally not worth the effort involved, unless you want to meet a minimum spend requirement and are happy to pay the fees involved. Even using a 2% card doesn’t net much profit unless you have a massive tax bill. Liquidating prepaid gift cards could still be worthwhile for some.

Feel free to ask other questions below and I’ll update the F.A.Q as we go along. Also remember that we’re not tax professionals, please consult with one of them relating to anything tax related.

F.A.Q’s

Do Any Credit Cards Code Any Of These Sites In A Bonus Category?

Your payment will be broken down into two different payments:

  • Your actual tax payment will show as “United States Treasury Tax Payment”
  • The convenience fee charged will show as ” Tax Payment Convenience Fee”

As far as I know no credit cards will earn a category bonus on this purchase. It’s possible that they do.

Can I Use Visa/Mastercard/American Express Gift Cards To Make A Payment?

Some people have had success in doing this in the past, apparently Official Payments allows you to use more than two debit cards when paying over the phone. Just keep in mind you’ll be paying a $2.25 fee per card. I have no idea if this still works or not.

Will I Be Charged A Cash Advance Fee?

As far as I’m aware, no major credit card issuers charge a cash advance fee. This is confirmed by the websites of each of the payment processors:

Post history:

Update: We’ve updated this post to make it relevant for 2020, hope you enjoy! One thing to note is that the IRS is no longer prevented from fees for processing credit/debit cards directly under 26 U.S. Code § 6311(d)(2) as amended. This won’t make a difference for this tax year, but might make things interesting for 2021. Hat tip to reader Superman

 

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MisterBill
MisterBill

Help! I bought a $500 Vanilla Visa at Acme and it’s been rejected by both ACI and Payusatax. I don’t see any way on the Vanilla website to even set the zip code for online use. Do I need to do anything special to use this? I never had problems when they sold Metabank cards.

MisterBill
MisterBill

Update — turns out that I did not wait long enough after purchasing it. I ended up calling and was told that there was a delay in showing loaded funds, which was odd since their site was showing the funds were there. But I tried again on ACI and it was accepted. Phew!

venkatesh Appala
venkatesh Appala

I am very new to paying taxes using Debit or Credit Card. Please help me on answering my questions with little patience. I tried to go through comments below and still I am confused. Thanks.

I started filing taxes and I owe ~$40K because of ROTH IRA conversion.

1. Can I buy Prepaid cards using my credit card (gives cashback or meeting spend limit) and use these prepaid cards to pay taxes?

2. I see we have a limit with each processor to pay taxes. So for 3 processors, I can pay max 6 payments. Will I be able to pay 6 payments for each SSN? if I am filing jointly and married?

3. I think we can buy max $500 prepaid card. Any other thoughts on buying larger amounts prepaid card?

4. If I pay money using these processors before April 18, 2022, will I be able to report these while filing taxes and reduce the amount I owe or do I need to pay full amount again and apply refund later for the amount I paid using these processors?

Thanks again!!

lilurbanachiever
lilurbanachiever

1. Yes. 3. I think Simon Mall might sell higher denomination cards. Personally, I would not mess about with such a high tax bill and just pay from my bank, but that is my opinion.

venkatesh Appala
venkatesh Appala

Thanks for the response.

aran
aran

I wonder if someone can help me answer this as its my first time. I can make ‘Payment with 2021 federal extension’ via the 3 processors by Apr 15 and can still file by Apr 18? Do I need to wait for the payments to settle or check the status etc?

c3
c3

1. Yes. If you have paid enough with the extension payment, then you can even file later.
2. No.

aran
aran

Great, thanks.

staradmiral
staradmiral

Warning data point:
I finally received my 2020 tax refund this march (that’s right 2020), after using credit cards to overpay my taxes, despite being owed a refund, so I was due an even bigger refund. My 2020 tax return had ~$11,000 refund, of which $6000 was regular refund and $5000 was estimated tax payments made with credit cards. I had done this prior years (2018, 2019) without issue. Part of my return, the $6000 was sent to me in July 2021 but the portion made with credit card payments was not. After numerous calls to the IRS the 5000 credit card portion needed to undergo further review before it was refunded to me. 1 year after filing i finally got the refund.

Be warned if you do this multiple years for large amounts it may be marked as suspicious by the IRS and you may not see the money for a year. I will be meeting MSR in different ways going forward.

Ferris
Ferris

Same boat for me except I did a bigger amount. They said CC companies weren’t getting back to them and wouldn’t take statements from me. Later on, they said they would accept statements which I have already submitted, but haven’t heard anything back yet.

c3
c3

Which category did you use for the credit card payments? 1040-ES, 4868 extension, or 1040 balance due? That may be an indication of where the problem is.

StarAdmiral
StarAdmiral

I did 1040 2020 estimated payments using payusatax website.

c3
c3

Hmmm, not the scenario I was thinking of. Perhaps the refund amount was too large compared to your overall tax liability.

Chuck

Did you get 3% interest on the delayed $5,000?

StarAdmiral
StarAdmiral

yes I did get interest

Trevor
Trevor

CPA here… did you have a bunch of tax credits that you were eligible for? Could be child tax credit, earned income credit, and the stimulus. Usually that’s what holds up refunds. I haven’t seen issues just with high overpayments in the past. You never know — things can always change. I did want to be sure there weren’t other factors at play.

StarAdmiral
StarAdmiral

I got child tax credits and stimulus payments on time without issue

Kyle

Trevor I think not getting your overpayment is more common than you think. I only received a portion of my overpayment for 2020 taxes. 14 months later I still have a negative account balance from my 2020 taxes of which I have not been paid. Good thing it wasn’t a huge amount because I have had to front the money for that long.

TaxPayer
TaxPayer

Got hit with a big tax bill (30k). Is the wells Fargo 2% the best way to go about IRS payment for Cashback? It also offers a 0% apr so I can carry the balance for 15 months

Gerald
Gerald

Pay1040.com now charges $2.50 for debit. I tried to liquidate 2x$500 MC and Visa gift cards with each of the providers to pay my estimated tax. Pay1040 and ACI Payments warned me that I was doing a duplicate payment but let me proceed. PayUSAtax wouldn’t let me do a second identical payment. I’ll try again in a few days.

Terry
Terry

I have never had a problem with Pay USATax when doing an identical payment several days later.

Ferris
Ferris

Just a warning for those meeting MSR…last year I made a few payments before filing my taxes in March. I still have not received my return for those. The latest info I have is that IRS sent out payment verification for those card payments and over a month later haven’t received it back yet. It took 4 months with an IRS Advocate just to get this information.

MC
MC

What kind of payments were they…estimated, extension, or “accidental” 1040 overpayment? Did you claim them when you filed for a refund? Do they show up on EFTPS?
Thanks Ferris

Ferris
Ferris

You may classify them as “overpayments”. I paid them in late February and filed taxes about 2 weeks later to allow time for funds to settle. They show up on the IRS website including my Transcripts.

c3
c3

If you use the “balance payment” to overpay, and then claim refund (or lower payment due) on the return, you’re just asking for trouble.

staradmiral
staradmiral

i was in the same boat. I got my 2020 tax refund this march, 1 year later . see comment above

Wil
Wil

Someone mentioned previously that cards issued by Metabank and Sutton bank work for different processors. Do we still have these restrictions now? My safeway only carries VGC/MGC issued by Metabank. Can someone share which card works for which processor based on your current experience?
In particular, anyone successfully used metabank VGC to pay on PayUSATax? Which card works for PayUSATax?

Thanks.

c3
c3

PayUSAtax requires Metabank.

c3
c3

I just used Sutton successfully with PayUSAtax, so both banks’ cards work with all 3 processors now.

MC
MC

Metabank VGC worked at all three for me in January

c3
c3

Thanks for the heads up. Just confirmed Pay1040 myself. Now Pay1040 and ACI work with both cards.

Rose B
Rose B

I’m just getting into the idea of paying my taxes (both estimated and annual) using a debit or credit card. I also happened to just get details about the Nearside debit card that earns 2.2% cashback. Anybody have DPs on whether that works for paying taxes?

Mr. Urty
Mr. Urty

DP on refund turnaround:

1/10/22: $10k Q4 2021 estimated payment via pay1040
1/18/22: $5k Q4 2021 estimated payment via pay1040
2/20/22: filed federal 2021 return
3/5/22: refund approved
3/9/22: received full refund