A Complete Guide To Paying Your Federal Taxes With A Credit Card, Updated For 2020

Update: We’ve update 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

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 & 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 1.87% 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 1.87% 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 fee1.87% (minimum $2.59)See debit/credit card fees
PayUSAtax.com$2.55 flat fee1.96% (minimum fee $2.69)See debit/credit card fees
OfficialPayments.com/Fed$2.00 flat fee ($3.95 for payments over $1,000)1.99% (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 2.5% 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:

 

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tripleM
tripleM

Today is the first time I noticed the IRS list out Pending Payments on the account. Maybe they were trying out the new software back in in September when lilurbanachiever was pointing out the problems, and now they have it fixed (I hope). Here is what it is stating:

Pending Payments
We are processing your pending payment (may take up to 1 week). The amount is not yet reflected in your balance.

Please note: payments by check or money order are not included in the list.

Yu
Yu

Anyone used BOA cash rewards card to pay tax and still get 5.25% cash back (assuming you are a platinum rewards member)? Thanks.

Cindy
Cindy

Any of them taking Q4 ES yet? I tried to make a payment via OP and it says maximum number of this payment type has been reached. Anyone know when they will start taking Q4 payments?

tripleM
tripleM

Cindy, my last 4 payments to OP were July 4, July 9, July 19 and July 28. I do have an old e-mail from O.P. dated March 17, 2020. It states:

Quarter 1 ES payments – March 1st 7am ET through May 15th 7am ET
Quarter 2 ES payments- May 15th 7am ET through July 15th 7am ET
Quarter 3 ES payments- July 15th am ET through October 15th 7am ET
Quarter 4 ES payments – October 15th 7am ET through January 1st 7am ET

The OP people have screwed up the payments dates in the past, so I do not put full faith in this e-mail I received from them.

Cindy
Cindy

Thank you! that is very helpful. I’ll try again on 10/15 then!

Justin
Justin

Cindy, I was able to get a payment to go through just right now when I was getting the two payment limit message previously.

Cindy
Cindy

Thank you for the reminder! I was just able to make a payment as well!

lilurbanachiever
lilurbanachiever

Interesting that they have a blackout period of Jan-March. Not good for me personally because I have some cc spend I wanted to do in January. Well, at least my most recent payment showed on my IRS account within days.

tripleM
tripleM

Anybody using their Chase Freedom cards through Paypal to make a payment to payusatax.com for their 1040 ES? 5% cash back on the payment and the fee with a 1.96% fee translates to 3.14% discount.

Queue_Underflow
Queue_Underflow

tripleM Yes, I just did this with Discover last quarter and I did it in Q4 of last year with Chase Freedom. Only downside is you can only pay $1482 (which after fees is $1500.85) to max out your quarterly 5% bonus ($75).

tripleM
tripleM

PayUSA is charging 1.96%, so the best payment would be $1471.16 + $28.83 in fees.

Gerald
Gerald

Actually, your best bet is to use Paypal Key, which effectively turns your credit card into a Mastercard debit card. I just made a $1498 payment using Paypal Key on payUSAtax.com to max out the Freedom Paypal category. I was charged the $2.55 fee.

tripleM
tripleM

Thank you! I’ll set up that method in December and use it. Please report if there are any problems like Chase not paying out the 5x UR points.

NY
NY

I would do it sooner rather than later if you can float the funds. Pay1040 was coding the PayPal Key as debit earlier in the month, now it no longer does and runs it as credit. PayUSATax is still treating it as debit as of today.

hailstate
hailstate

Prepaid Visa just worked on the Official Payments site.

Yu
Yu

Report: 1 of my payments made on 9/6 now showed up on 9/23.

lilurbanachiever
lilurbanachiever

9/23 ? Does the date make sense ? My pay1040 payments posted with a delay but they seem to be tagged with the actual date I submitted my payments.

Yu
Yu

Sorry typo. Payment made on 9/6 showed up in my IRS account on 9/30 and the payment date is still 9/6.

tripleM
tripleM

I think I know what you are asking… Our IRS accounts do not get updated for weeks after you make the payment. The date is always listed as the day you made the payment. For example: I made a 1040-ES payment on August 14. It did not show up in my IRS account until around Sep. 15; but the payment is still listed as Aug. 14 in the IRS account transactions.

hailstate
hailstate

Thanks to all for this and the previous comment thread. Kept me from freaking out a bit when the payments didn’t show up on the IRS site.
Paid on pay1040: 9/14
Showed up on IRS account: 10/2, with 9/14 date

tripleM
tripleM

If you are looking at payUSAtax.com, I recommend holding off. One month ago, I made a payment of $497.45 for my 2020 1040-ES. The payment still has not shown up in my IRS account. I have a printout of the receipt and it is listed in my payUSAtax.com account.
I sent them a message 36 hours ago, so far no response.
I have been on hold on the phone for more than one hour, nobody answering.
I paid with OneVanilla and still have the card and packaging.
If anybody has recommendations, please share.

Queue_Underflow
Queue_Underflow

I made estimated tax payments with both PayUSAtax (up to 3 weeks ago) and Pay1040 (up to 2 weeks ago) and they haven’t shown up on my IRS account yet. IRS is just slow; I believe the same thing happened toward the end of last year. If you have the confirmation from the processor I wouldn’t worry about it for a while.

lilurbanachiever
lilurbanachiever

Interesting, I am seeing some issues too. A pay1040 payment from two weeks ago is still not showing on my IRS account; yet another pay1040 payment and a payusa payment that I made a week later are already showing as pending. The funny thing is that EFTPS is much more efficient – they have been showing these payments the next biz day. The EFTPS used to be only way to keep track of your payments and pay via bank transfer until the IRS launched its own half-assed tool.

This is indeed worrisome, but thanks for posting – glad I am not alone who is alarmed by the ineffectiveness of the IRS tool. This is definitely something to keep an eye on.

lilurbanachiever
lilurbanachiever

And now the 1040 payment that was showing as “pending” also disappeared. Weird. What’s up IRS ? Why is my account balance still not updated with those recent payments ?

lilurbanachiever
lilurbanachiever

tripleM Queue_Underflow Any news for you ? One of my pay1040 payments from about two weeks just showed on my balance, but the other pay1040 payment I made three days before that posted payment is still missing. So I am concerned. The official IRS line is that it might take 1-3 weeks to post. I guess next week at the 22-day mark I’ll start by contacting pay1040.

Queue_Underflow
Queue_Underflow

lilurbanachiever I made Q3 estimated tax payments on 8/27 (payUSAtax), 9/4 (Pay1040), 9/5 (payUSAtax), and 9/15 (Pay1040). The first 2 now show up on my IRS account. I also had the last payment show up as pending for a few days, but it’s disappeared now. I would bet the problem is with the IRS, not the payment processors. I’m going to give it several more weeks.

lilurbanachiever
lilurbanachiever

Queue_Underflow Thanks for sharing, well at least they are posting. I am probably overreacting, but it is better to be safe than sorry when dealing with IRS. Note to self – next time do not wait till too close to the deadline and spread my payments across time and space. I had a 9/12 payment from 1040 posted this morning, but a similar payment from 9/08 is still missing.

If push comes to shove, I think credit cards give 60 days to file a dispute for “services not rendered”. But that is the very last resort.

Queue_Underflow
Queue_Underflow

lilurbanachiever tripleM This morning the last of my 4 Q3 estimated tax payments showed up on my IRS account. They all have the correct date too. My last payment was on September 15 via Pay1040, so you should probably see all of yours now too unless payUSAtax is slower for some reason.

lilurbanachiever
lilurbanachiever

Queue_Underflow Yep, I am all caught up too on both payment processors. Ultimately, everything posted right at the 3 weeks’ “official cutoff” +-5 days. I guess, this is the new IRS way. Thanks again for sharing.

Yu
Yu

lilurbanachiever, when was the last payment you made via PayUSA? I made my last payment on 9/13 via PayUSA, but it still hasn’t shown up in my IRS account . The payment made on 9/13 via Pay1040 did show up on 10/4 though.

lilurbanachiever
lilurbanachiever

My PayUSA payment was on 9/13 or 9/14. But there is no rhyme or reason with the dates – my pay1040 payments did not post in order. I hope you are also caught up now.

tripleM
tripleM

My August 14, 2020 payment showed up in my IRS account sometime between late Sep. 14 and Sep. 17, 2020. Just had to wait a couple more days I think. FWIW, I messaged payusatax.com, and they ignored my message. I tried calling payusatax.com and sat on hold for more than one hour while they were ignoring their phone calls. I tried the online chat and got help with less than 10 minutes of waiting. The payusatax support person sent me an e-mail with the approval numbers and contact info for the IRS. The payment showed up prior to me getting around to calling the IRS.

Yu
Yu

Queue_Underflow , lilurbanachiever . Yes, I have the same issue. My payments made on 9/6(pay1040) and 9/13(payusatax) still haven’t showed up in my IRS account. In the past, it took one week. I think it’s the IRS issue now, but not the processor’s. I will wait for a couple of more weeks.

lilurbanachiever
lilurbanachiever

Thanks to all for sharing. I had my 2nd pay1040 payment post this week, but my payusatax payment is still missing. Hopefully, it will post soon as well, it is still within the 3 week IRS time frame. No idea why exactly IRS is now taking so much time to post the payments. Thanks again for sharing – saved me from worrying too much 😉

lilurbanachiever
lilurbanachiever

Hmm, PayUsaTax and OfficialPayments have just declined a valid Metabank VGC. I used to get the same error with MCGCs so I am not sure what is going on. Anybody seeing the same issue ?

tjk144
tjk144

Official Payments has only been accepting MCGC’s for some time, but I was able to use a Vanilla Visa GC at PayUSATax on 8/28/20

lilurbanachiever
lilurbanachiever

PayUSATax seem to have worked today, on the second try. No idea why there was a delay. Also did not get the usual email from Payusatax, but the VGC was charged and I saved the receipt so I hope it will work. This glitch made nervous, luckily that was my last big-balance VGC.

Tom
Tom

I can confirm that the Vanilla Visa cards, sold at CVS and Walgreens, are working as debit cards for all three processors.

Eric
Eric

I just went through the whole process of paying with payUSATax (using PayPal) and received the below error. I tried it twice and it happened both times. The phone # listed on their website has a busy signal. You can’t make this stuff up.

“Error
Unable to process request”

Eric
Eric

I just tried again and it finally went through. Their servers probably can’t handle the influx of procrastinators.

Deb
Deb

Thanks, I feel ya brother…nothing like paying taxes at midnight (waiting till the bitter end) at least I didn’t wait till later on tonight! ..:-(