Update 3/18/24: PayUSA is now 1.82% (was 1.85%), debit cards now $2.14 (was $2.20).
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 | $2.14 flat fee | 1.82% (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 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%.
- 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
Got an offer in my Amex checking account . Anyone knows if paying tax is qualified?
Now through July 31st, earn 4 Membership Rewards® points for every $2 of eligible Debit Card purchases on up to $1,500 in spend.
Federal estimated tax payments on ACI still get 5% cashback (1% on the fee) when using PayPal/Us Bank Cash+, with utilities selected as a category.
Anyone verify this is still working?
Yes, worked for me on 6/17
reminder – capped at $2000 for 5%
It appears that Vanilla visa no longer works with payusatax.com. Until recently, you could use Visa Click to Pay. Has anyone had success in federal Q2?
Worked fine just now.
I tried using Click to Pay the next day with the same two cards. The first one I tried worked immediately (yay). But it took 5+ tries before the second one worked. I tried both new and returning user log-ins. This is all very wonky and weird but I’m glad it worked.
Having seen that one can use MCGCs on affirm.com, I’m wondering if it’s possible to make tax payments with Affirm at the debit card rate. It would be nice to make payments of more than $500 using gift cards, especially if those gift cards earn 5X UR with no fee.
CAUTIONARY NOTE: if you want your refund amount to EXACTLY match that on your tax return, make only WHOLE DOLLAR estimated tax payments. Otherwise your tax software (at least TurboTax) will round the amounts to a whole dollar but then irs computer uses actual amounts including pennies to calculate actual refund amount. This is important if you are using tax refund to buy paper I bonds for example.
Individual payments can have pennies, as long as the sums are whole dollars.
Fair enough
FYI You can make a total of 40 online payments per tax year:
1) 28 payments using the Form 1040-ES over 5 periods:
– 03/01 – 05/14
– 05/15 – 07/14
– 07/15 – 10/14
– 10/15 – 12/31
– 01/01 – 01/31 (available on PayUSAtax and ACI Payments only)
2) 6 payments using the Form 1040 before the deadline 04/15
3) 6 payments using the Form 4868 before the deadline 04/15
For Pay1040, 10/15-01/31 is considered the same period, which is actually the correct one.
Thank you! This is an epic rundown. Bookmarked!
What is the earliest date you can make an estimated tax payment for a given quarter? How early can I pay estimated tax for the period due on Monday, September 16, 2024? Thanks!
Thanh
For the processors, based on the dates above, 3Q is 07/15 – 10/14.
But I don’t think it matters with the IRS, other than being late.
I have $500 vanilla visa Sutton bank gift cards (purchased 4th quarter 2023 using freedom 5x paypal category + drugstore stack). I wanted to unload but IRS wants a zip code. Anybody know how to set a zip code or what to use? Doesn’t seem to be an option, I just see adding a pin. Another thread suggested the zip code in the fine print might work, but that didn’t here
But I had a hell of a time trying to use one to pay taxes even after assigning a zip. Ended up using it for some Costco gift card.
Thanks, I tried a url similar to that in reddit but it didn’t get me to a spot to put a zip in. May have to move on to something else
Have you tried just using it without assigning a zip for the Sutton card. Those cards don’t require registering so it might work without assigning a zip.
P2 and I had a large tax bill to facilitate payment for an elderly friend in a care facility. Applied and approved for Wescom Visa (P2, $500 SUB), US Bank Altitude Connect (P2, $500 SUB), BofA Premium Rewards (me, $600 SUB – $95 annl fee) and Chase Ink Preferred (my corp, $1k SUB – $95 annl fee). We’re on track to net about $2.3k after all fees paid, some were credited already. Thanks for the tip on using Paypal for business cards doing personal federal payments, DoC! (I didn’t check that one before applying for the biz card, you saved me.)
I read in an earlier comment that the ability to make Form 4868 payments through the third party providers expires on 4/15. Does anyone know which, if any, tax payment options are available after the tax deadline?
For example, with PayUSATax, I see these payment categories listed: 1040 Current Tax Return 2023, 1040 – Prior Year Tax Return, 1040 Installment Agreement, 1040-ES Estimated Tax, and Other Types.
As a follow-up, all of the non-Form 4868 payment options remained post-4/15. This can be helpful if anyone has already filed an extension and wants to submit additional payment for their 2023 1040 Current Tax Return.
How would I report the additional payments (non 4868) on my tax return? I only see the section for reporting my 4868 payment on my online Tax website.
See this discussion:
https://www.doctorofcredit.com/a-complete-guide-to-paying-your-taxes-with-a-credit-card/#comment-1803301
May have been mentioned elsewhere: Pay1040 processes Discover Debit as a debit card, ACI Payments treats as credit card.