Update 1/3/25: Pay1040 showing 1.75% on tax website, but 2.89% when you click through and pay. It seems business cards and PayPal are being charged the 2.89% whereas personal cards are being charged 1.75%. I suspect this will be fixed, but keep an eye out when actually paying what rate it’s showing. Hat tip to FM
Update 1/1/25: The new lower fees are now active – 1.75% on Pay1040 and 1.85% on ACI. PayUSATax website is now dead.
Update 12/6/24: The fees went down: Pay1040 is just 1.75% now (previously 1.87%), ACI is 1.85% (previously 1.98%); both have a Paypal option as well. PayTaxUSA is no longer showing on the IRS website for reasons unknown, so if you go with the IRS list there are now only two options; it’s possible it’ll reappear at some point. (ht BuyerCompetitive6425)
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 1.75% to 1.85%), 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 | $2.15 flat fee for consumer/personal cards | 1.75% for personal cards, 2.89% for business and PayPal | See debit/credit card fees |
ACI Payments (formerly OfficialPayments.com/Fed) | $2.10 flat fee | 1.85% (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
Can you include the important dates for the payment window for each IRS quarterly estimated tax payment in your post? Is the following information correct?
Q1- deadline 4/15:
Pay between 3/1 and 4/15
Q2 – deadline 6/15:
Pay between 5/15 and 6/15
Q3 – deadline 9/15:
Pay between 7/15 and 9/15
Q4 – deadline 1/15:
Pay between 10/15 and 1/15
For people who participated in the Evergreen Money promo, the 1099-B and 1099-INT from Jiko are now available online. They can be found under Settings→Documents→Tax Documents.
There is a separate annual thread for 1099s.
https://www.doctorofcredit.com/which-banks-send-out-tax-form-1099-discussion-post-for-2024-tax-forms/
Sorry, wrong thread.
Two separate questions for those smarter than I –
Are payments limited to two per processor, or two total card payments? I see conflicting data on this.
If married filing jointly, does one effectively double that limit as P1 and P2 can both make tax payments?
Thanks for the help.
IRS limit is two total. Enforcement is the responsibility of the processors and they don’t talk to each other so it’s effectively two per processor.
Theoretically that works, but the instructions specifically say not to do that and if P2’s payment don’t get attached/credited to the right account you’ll have to call the IRS and explain why you did something you were warned not to do. Or so I’ve heard.
Thanks for the response and info.
Do I have to pay through Paypal on ACI with a Biz card?
Yes, if you’re paying personal taxes.
Hi, I used the ACI payment processor with the PayPal workaround for an ink card. However, when I went to delete that credit card out of my PayPal it said “keep your automatic payments working” and that automatic payments will still be processed if the card is deleted. the vendor listed for automatic payments is ACI. However, the charge already went through on my statement and I don’t recall scheduling anything. Has anyone experienced this as well?
PayPal always does this, just ignore it. It shows you ever purchase you ever made to try to scare you into leaving the card.
thank you!
Need help here- Do I add Ink card to Paypal, and then pay ACI using paypal account for e.g. $5000? Does Paypal charge CC % fee for the $5000 or just ACI? what % charges? Thank you!
I have a question for more experienced payors: an elderly relative has an extension until 2/3/25 to make her estimated tax payments for TY 2024 pursuant to a disaster declaration. I went to make her payments today only to find out that the ability to make 1040-ES payments for 2024 has been disabled on both on ACI and Pay1040 as of 7am Eastern on 2/1/25. Can I make general Form 1040 payments instead of 1040-ES payments for her, and have them count to reduce or eliminate any estimated tax penalty, or will doing it that way mess something up? I guess the alternative is to have her pay by check with a 1040-ES coupon, but, as we all know, that is the last option.
You can try direct pay, seems to still allow 2024 ES payments:
https://www.irs.gov/payments/direct-pay-with-bank-account
The table of payment types says ES payments starting in February apply to current year only, so I wouldn’t wait too long…
Confirmed that Discover 1% card did work for my federal taxes
Assume you mean debit?
Yes.
I’m working on meeting the sign-up bonus requirements for two credit cards and am unsure whether I’ll be able to file my 1040 by April 15th or if I’ll need to file for an extension.
Question:
Regardless of whether I file my 1040 on time or request an extension, can I split my tax payment between two credit cards? Specifically:
Does the IRS payment processor allow two back-to-back payments using different credit cards?Will the IRS recognize both payments and automatically apply them correctly to my account?Would appreciate any insights—thanks!
You should wait 24 hours before making a second payment with the same processor. You can do back-to-back between the two processors if you want.
I’d wait for a couple of days at least between payments, but generally IRS should not care. They go by name, SSN and DOB so make sure those are correct. Also, I would get an IRS online account to monitor the progress of your payments there and check your overall balance. That reminds me, time to check if my last payments have been finally processed.
Got it! Thank you
JD and
lilurbanachiever !
Dumb question: for those of you doing 4868 payments, what do you put for Estimation? If I plan on making 4 payments of 500 do I put 500? 2000? 8000?
Form 4868 is an application for an extension of time to file for 6 more months. Using the normal tax due date of April 15, the total time allowed to file your income tax return would be October 15.
How are you making 4 payments on form 4868? I don’t believe it’s possible.
Someone correct me if I’m wrong.
Same way you make 4 1040-ES payments/qtr…
From the H&R Block website:
“You can request an additional extension of time to file taxes beyond the six-month period, but you cannot ask for multiple tax extensions. To do so, you’ll need to include a letter explaining why you’re in need of an additional tax extension. Mail your letter to the address found on Form 4868 under the heading “Where to File”.”
You’re just making payments through the processors. They will automatically file the extension form for you, some of which will be duplicative if you make more than one payment. No one is suggesting you will get extensions past 10/15 for doing so, lol.
It doesn’t really matter what number you put, but a reasonable figure would be the total of all payments plus withholdings made to date including the current one.
When does either site show the option for 2025 estimated payments?
Think it’s April 1.
3/1. February is the dry month.
https://www.pay1040.com/frequently-asked-questions
https://fed.acipayonline.com/hp_faq_irs_mp_p.jsp
Oh, darn. Thanks! Just made an extra 2024 payment and I’ll get it back on my taxes in a few weeks then. Had to cycle through a bonus spend by early February.