Update 4/17/23: Reposting with Tax Day being tomorrow.
Update 1/16/23: A lot of people are experiencing issues with payUSAtax processing Chase business cards and other business cards. The workaround is to use Paypal.
Updated for 2022/2023: Biggest change is payUSAtax is now the cheapest at 1.85%.
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 1.85% to 1.98%), 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 Cards | Credit Cards | Digital Wallet | |
|---|---|---|---|
| Pay1040.com | $2.50 flat fee for consumer/personal cards and 1.87% for all other debit cards (minimum $2.50) | 1.87% (minimum $2.50) | See debit/credit card fees |
| PayUSAtax.com | $2.2 flat fee | 1.85% (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 2.9% for Visa, Mastercard, Discover or Amex.
Making It Worth It
High Cash Back/Rewards Cards
As you can see, payUSAtax is the cheapest option at 1.85%. Even if you used a credit card that earned 2% (e.g Fidelity Visa or Citi Doublecash) you’d only be making 0.15% profit. Even if you had to pay $10,000 in taxes, you’d be earning $200 in rewards but having to pay $185 in fees for a profit of $15. 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 Superma
So if you usually get a refund. If you “overpaid” ahead of time would your refund just be that much larger? I don’t have anything else to put 15k spend on currently? I don’t mind if iI only get a .015% return after a few months. Just need to know if it would work safely or cause issues? Thanks
Depending on your income level, $15K probably wouldn’t raise flags. Last year I had unintentional large overpayments. IRS wanted additional identity verification. State required manual review of my account and caused many months of delay for my refund.
I used Metabank VGCs to pay estimated tax successfully on 8/22, but today they don’t work. They say they’re not allowed for bill payments. Packaging says “pre-authorized or recurring bill payments,” which these aren’t. When I try to look at the full T&C, the website times out. I’m on the phone, waiting for the supervisor’s manager. In the meantime, if you’re planning to use these for bill payments, beware.
False alarm. I entered the wrong expiration date, which got the card flagged. I was told the flag would be cleared in 45-60 minutes. After that, it worked
I recently got a new Bank of America Flying Blue Card that awards 70K points for a 2K spend. I’d like to prepay the taxes on a trust I am grantor/trustee on for this year that will actually be due in April 2024. When I go into any of the IRS approved credit card tax paying services, I only see choices for paying on a 1041 form for “current year 2022” not 2023. No forms for estimated quarterly payments for 2023. If I pay under the current year 2022 Form 1041, will the overpayment for 2022 be applied for 2023? Thanks!
Is there an issue if you the third and fourth ES payments before October 15? I may have to be out of the country between Oct 1 and Jan 30 so I wanted to make my last ES payment before I left. In looking at the dates for the payment processors, it sounds like I can’t or shouldn’t do that. Any thoughts? TIA
You can increase the payment amount, but not the number of payments through the 3 processors.
So it’s more the payment processor than an issue with paying the IRS early? That helps a lot, thank you. I only make single payments for SUB purposes but at the very least I could mail a check for Q4.
The IRS definitely has no problem with you paying early. There are 3 processors that accept 2 estimated tax payments per period so you should have plenty of options.
Great, thanks. I usually only use PayUSA so I can make two ES payments for Q3 and Q4. That was my best case scenario.
Pay1040 lets you schedule future payments.
Does IRS.gov only allow login via ID.me ? I cannot find a way to login via my old login credentials.
Yeah, they are forcing that now. I still did not get around to do the switch.
Looks like payment processors are still allowing one to file 4868 – any idea when this will stop? The form itself was due by tax day 4/18
is there one that still processing the extension? I just realized I need to file for it…
As of my previous post both pay1040 and pay tax USA were allowing to select form 4868 payments for 2022 tax year
May 15.
Thanks!
asking for a friend can you pay estimate taxes as a w2 workers ?
why not, you can pay estimated taxes even if you don’t work
Yes.
I pay estimated taxes from giftcards.com visa card deal.
I withhold less in taxes.
It evens out.
For those in CA that have auto extension on taxes, any idea how many tax payments we can make between now and the new deadline? Would they follow the standard ‘estimated tax ‘ rules of 2 per quarter?
You can pay estimated taxes if you want. No one is stopping you. Remember the estimated tax periods for the processors don’t match up with the ones for the IRS.
I made payments through each of the processor services, all on April 16th, on 3 separate cards to satisfy different signup bonus requirements. The Pay1040 payment is showing up on my IRS online account page as a Pending Payment with a date of April 18th, while the other two are listed under Scheduled Payments with a date of April 19th. Does that mean the IRS will consider the latter payments as 1 day late?
A couple of lines on the IRS website make me hopeful this won’t be an issue:
“The payment date will be the date the charge is authorized.”
“Need an extension? If you pay part ($1 minimum) or all of the tax you estimate you will owe using a debit/credit card, you will not need to file an extension form, such as Form 4868. Your payment will act as the extension.”
These suggest that the “scheduled” payments will either be backdated to when I made the transactions, or serve as effectively a 1-day extension past April 18th.
I’d appreciate others’ input and experiences with how close-in payments are processed, and whether I’m interpreting the rules correctly.
Totally normal, the dates for the scheduled and pending payments are always off by a few days. Give it a few days or weeks until the payments are fully processed, and then they will show up for the date you actually did them.
I had no idea I could split up the payments more than twice by using multiple payment services. I used the limitation of 2 payments allowed as a maximum between all payment services (could be the same service used to pay twice). Are you sure you are allowed to do it this way ? Although I wouldn’t have done anything differently here, I would like clarity on this topic. Have you done this in the past as well?
Here is what the IRS says: https://www.irs.gov/payments/frequency-limit-table-by-type-of-tax-payment
So unless you’re paying more than one type of taxes (Personal and Business), I’m not sure how you were able to make more than 2 payments.
Thanks.
Interesting, I do not remember seeing that language from IRS before. I probably missed it unless this is new. In the past they would tolerate splitting estimated payments over different processors up to 24/year.
It has said that as long as I can remember. But in practice the limits are applied separately for each payment processor. I assume they don’t communicate with each other, only the IRS.
May or may not have been mentioned elsewhere:
When you make a timely extension payment through one of the services, it automatically extends your federal return, i.e., no need to separately file Form 4868.
I’m super confused by this. I made the payment using the PayUSAtax. but I chose “form 1040 current tax return 2022” instead of “form 4868 tax extension”. In this case, did I get an extension?