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

Updated for 2021. The major change was Pay1040 increasing fees from 1.86% to 1.99% for credit card payments, making it no longer the cheapest option.

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 1.99% for all other debit cards (minimum $2.58)1.99% (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)$2.00 flat fee ($3.95 for payments over $1,000)1.99% (minimum $2.50). AmEx over $100,000 is 1.9%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, PayUSA is the cheapest option at 1.96%. Even if you used a credit card that earned 2% (e.g Fidelity Visa or Citi Doublecash) you’d only be making 0.04% profit. Even if you had to pay $10,000 in taxes, you’d be earning $200 in rewards but having to pay $196 in fees for a profit of $4. 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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Wil
Wil

Does Paypal Key work when being used to pay IRS (pay1040 or ACI)?

nik
nik

I paid estimated taxes using Amex though Payusatax.com a few months ago. The site charged me a convenience fee. Amex treated the convenience fee as a cash advance and started charging interest on it. The charge however appeared on my statement as a charge including earning 1x MR points. I am disputing this currently with Amex.

Anyone have similar experiences?

c3
c3

A new payment period has started (10/15), so whoever had issue with PayPal can try it again.

C
C

Tried to pay estimated taxes at payusatax.com and it won’t go through. I click Paypal and nothing. My last payment with payusatax was 7/15/2021. Anybody have similar issues?

c3
c3

This has been discussed extensively in this thread. Try again on 10/15.

tjk144
tjk144

I tried to make an estimated tax payment at PayUSATax.com today with a Vanilla Visa Gift Card. I received a message that the card was not a debit card. Used the same card at Pay1040.com and it went through fine. I used Vanilla Visa Gift card at PayUSATax.com on 9/06/21 and it was accepted. Did something change?

c3
c3

There are different versions of the Vanilla card. Someone reported the Sutton Bank version not working with PayUSAtax. The MetaBank version worked with PayUSAtax but not Pay1040, but I have not tried it again.

tjk144
tjk144

It was a Sutton card purchased at Walgreens. The cards that worked at PayUSATax back in Sept were also purchased at Walgreens but I don’t know whether they were Sutton or Metabank.. I wonder if they sell both kinds. Does anybody know which cards that CVS sells?

Anks
Anks

How does the IRS know during tax filing that the amount was already prepaid?

Do I need to report it somewhere on the Form 1040? (If yes, then do I need to submit some proof of these estimated payments?)

Or do they maintain the estimated payments internally for each account and automatically add it to the refund amount calculated in Form 1040?

Eric

I used an online tax website for my 2020 taxes and there was a place that asked if I made any estimated tax payments. If you are doing it by pen and paper, I can’t help you.

lilurbanachiever
lilurbanachiever

The IRS knows everything. You can also keep track if you create an account on the IRS website, which is a good idea in any case.

rui
rui

for 1040ES, how is the 2 per quarter limit applicable for filing married jointly? Can you make 2 payment per person per quarter, or just 2 per tax return per quarter?

Aks
Aks

Any data point on which payment service will allow make a payment using multiple debit card on the phone?

C
C

Are the number of 1040-es estimated payments per quarter based on calendar (ending 9/30) or due date (ending 10/15) for q3?

c3
c3

From ACI:

For 1040-ES – Estimated Tax – Tax Year 2021, you can begin making quarterly payments on the following dates:
● March 1, 2021, 9am Eastern Time through May 15, 2021, 7am Eastern Time.
● May 15, 2021, 7am Eastern Time through July 15, 2021, 7am Eastern Time.
● July 15, 2021, 7am Eastern Time through October 15, 2021, 7am Eastern Time
● October 15, 2021, 7am Eastern Time through January 1, 2022, 7am Eastern Time

Terry
Terry

Does anyone have experience paying taxes using Paypal key and, if so, does it go through as a debit with the fixed lower fee? I am assuming that Paypal key is considered as a Paypal transaction for the purposes of Chase’s 5% category for the 4th quarter.

atc1
atc1

It appears that you can only use the PayPal payment option once during a given quarter based upon what others have posted here.

I believe you will be charged the 1.96% convenience fee for using the PayPal payment option.

Terry
Terry

But I would not be using the Paypal option. With Paypal key, a virual card number is assigned so it would go through the Debit/Credit option I would assume.

atc1
atc1

I’m not familiar with PayPal “key” I assumed you were referring to the PayPal payment option.

Eric

From past comments, it is likely PPK no longer works for this purpose. Don’t make the same mistake I did and delete your Key or you may never get access to it again.

MisterBill
MisterBill

Trying to make a payment on Payusatax with PayPal. When I click on the PP link, I see the PP window pop up and immediately close. Tried it in incognito mode and also on both Edge and Chrome. Very annoying. Fortunately, it’s only a $350 payment, so I won’t lose that much using my BofA Premium Rewards card instead. I even tried logging into PayPal from a different window before clicking on the box, but no go.

Update — tried another machine that I have Firefox on, and it’s also not working. PayPal window opens up and immediately closes.

Yitzchak
Yitzchak

Have you made another payment to that tax form/year from payusatax recently? I and others have experienced problems making a second payment, where if you were using a credit card it would give you a warning.

MisterBill
MisterBill

Yes — that must have been it. I paid my 2q taxes late (and with PP), so this was considered the second payment in the quarter. When I paid by credit card, it warned me that I was making a second payment, but it let me push it through. At least I had a $500 debit card to use for most of the payment this time.

atc1
atc1

I too am having the same problem as MisterBill. Are you suggesting the problem is caused because you made a previous estimated tax payment in that quarter (July-September)?

Jack
Jack

I’m about to make my Q4 estimated payment, can I do one before the end of September with PP and then a second payment via PP in October? My payment is over 2k so I’d prefer to split it. If I can’t use two Discover cards during September I can use Chase in October.

c3
c3

Q4 payment does not start until Oct 15.

Jack
Jack

Are you referring to PP quarters? I can pay my Q4 estimated taxes from 9/1.

Celia
Celia

c3 Jack Per the IRS:

2021 1st Quarter (January 1 – March 31): April 15, 2021
2021 2nd Quarter (April 1 – May 31): June 15, 2021
2021 3rd Quarter (June 1 – August 31): September 15, 2021
2021 4th Quarter (September 1 – December 31): January 18, 2022

c3
c3

Those are just the 4 due dates, NOT the payment cycles used by the tax processors. From ACI:

For 1040-ES – Estimated Tax – Tax Year 2021, you can begin making quarterly payments on the following dates:
● March 1, 2021, 9am Eastern Time through May 15, 2021, 7am Eastern Time.
● May 15, 2021, 7am Eastern Time through July 15, 2021, 7am Eastern Time.
● July 15, 2021, 7am Eastern Time through October 15, 2021, 7am Eastern Time
● October 15, 2021, 7am Eastern Time through January 1, 2022, 7am Eastern Time

Celia
Celia

Huh. In the past, including so far this year, I’ve been paying my estimated taxes online the first week of April (Q2), June (Q3) and September (Q4). My accountant never flagged it.

With Q3 due 9/15, why is the date through 10/15 for payments?

Edit: In Payusatax, they don’t seem to have separate dates so maybe that’s why.
Form 1040-ES Estimated Taxes – Tax year 2020: 01/01/21 at 9am ET through 02/01/21 at 7am ET.
Form 1040-ES Estimated Taxes – Tax year 2021: 03/01/21 at 9am ET through 01/01/22 at 7am ET.

c3
c3

There is nothing wrong with your payment dates. People who want to make multiple payments per “quarter” need to pay more attention to these dates.

I’m pretty sure PayUSAtax has the same payment dates, just not explicitly stated. Pay1040 does.

Jack
Jack

So there’s no harm in my original question of doing one PP payment this week with Discover and another PP payment next month with Freedom for my Q4 payment? I’ve never made multiple payments for an estimate payment before and the date debate is throwing me. I planned on doing half of my Q4 payment on 9/25 and half on 10/25 using PP both times. That’s okay, right? Thanks.

c3
c3

If you have already made a Q3 payment with PayUSAtax, then the 9/25 payment will be considered the second Q3 payment. People are reporting problem with the second payment using PayPal.

Jack
Jack

My Q3 payment was made 7/2 using my CSP to meet the MSR. FWIW my Q2 payment was made 6/4 using a CSR to meet the MSR. Both using PayUSAtax.

Honestly, I just didn’t want to blow my entire 1500 on Chase next quarter. I have two Discover cards but saw the comments about two PP payments being an issue.

Celia
Celia

c3 So if I’m understanding correctly, it really doesn’t matter when you pay your estimated taxes (by the IRS dates) if you’re just making one payment. The dates you’re referring to are for those people who are making 2 payments per quarter to use up VGC or other MSing?

c3
c3

As long as you have paid enough before the IRS due dates, that’s all it matters. Excess amounts are carried forward to the next due date. Under payments are charged interest until they are paid.

Celia
Celia

Thank you

Eric

When I made my payment on PayUSATax it didn’t even ask what quarter I wanted to apply it to. Is that normal? I don’t remember what happened last year.

c3
c3

Your payment date determines the quarter (same for all 3 processors), and the quarters are used to enforce the limit of 2 payments per quarter per processor only.

tripleM
tripleM

I made a payment with PayUSAtax.com on August 21, 2021. I did not make any other 1040-ES payments with them during CY 2021; and I did not screw up any of the input data. The payment never made it and they are ignoring electronic messages and nobody ever answers the phone over there. The longest I waited on hold before giving up was 2:05.
DO NOT USE PAYUSATAX.COM.
I am trying the dispute with BHN on the Simon card. If anybody has any recommendations on how to get them to make the payment or refund, please share.

atc1
atc1

Just curious, are you going to irs.gov to see if they received payment?

tripleM
tripleM

Hi, I have been doing this for years. I also have an EFTPS account. Payusatax did not make any payment on my behalf.

Jack
Jack

Did you not get confirmation or receipt from PayUSATax? And they took the money from your Simon Visa card?

tripleM
tripleM

Payusatx provided a confirmation number. This site shares some info on VPS: https://www.flyertalk.com/forum/manufactured-spending/2045468-avoid-payusatax-com.html