[Update] A Complete Guide To Paying Your Federal Taxes With A Credit Card, Updated For 2022/2023

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 CardsCredit CardsDigital 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 fee1.82% (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:

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DP719
DP719 (@guest_1830617)
April 14, 2024 09:42

For higher earners, don’t forget to check whether you need to pay the new “Net Investment Income Tax” if the modified adjusted gross income on your 2023 tax return is greater than the applicable threshold e.g. $200,000(Single), $250,000(MFJ).

jz
jz (@guest_1830544)
April 13, 2024 23:30

For paying “Form 1040 Current Tax Return 2023”, do I have to wait till the IRS accepts my return first? Then I can make a payment on payusatax.com?

c3
c3 (@guest_1830549)
April 14, 2024 00:02
  jz

no need to wait

Churner
Churner (@guest_1830464)
April 13, 2024 18:53

What are some good credit cards that we could pay taxes with? I’m looking for a credit card in the spend $500 get $200 range.

Jim
Jim (@guest_1830280)
April 13, 2024 04:04

Sharing a DP. It looks like PayTaxUSA doesn’t like/accept Chase Inks directly. From Google searches, it seems to be quite a common complaint. I see a few folks from this thread encountered this issue last year.

Fortunately, Pay1040 had no issues accepting my Ink payments at 1.87%.

Since we’re limited to two payments per processor, I tried PayTaxUSA again before ACI, but first linking my Ink to Paypal, and this worked. I was under the impression using Paypal with PayTaxUSA would incur the 1.96% fee stated on the Paypal website, but fortunately, it charged only 1.82% on the final submission page.

Just to note, the Paypal payment agreement does state it will automatically charge the second, etc. linked credit card if the first fails. I’ve run into exact issue at Paypal a few years ago, so I usually delete all other linked cards to avoid the payment processing on an unintended card.

Frey
Frey (@guest_1830314)
April 13, 2024 10:31

i was able to use my CIP directly last month on PayUSA. Was fully expecting to have to utilize PayPal but didn’t need to. I’ve had issues with other biz cards before. Seems to be hit or miss. Thanks for the DP.

Looney Tunes
Looney Tunes (@guest_1830175)
April 12, 2024 19:54

Queue_Underflow Just used Paypal with US Bank Cash+ to pay my taxes and know I have to wait until the transaction is no longer pending before I can download the transaction to check the MCC code, but curious from those that already did it, did you notice what the transaction description shows while in pending status?

Mine shows: Description Auth : Paypal *Us Treasury

PD
PD (@guest_1829450)
April 11, 2024 13:31

4/10 – USBank Cash+ 5% DP (I selected utilities for this quarter):
Paid taxes through paypal w/ ACI payments – the tax portion is earning 5%! Fee portion is only receving 1% cashback.

Using method described by Queue_Underflow, I downloaded my transacations as a CSV and verify that the MCC is 04900 for the tax portion (ELECTRIC, GAS, SANITARY, TELEPHONE OR WATER UTILITIES).

Fee porition is 07372 (can’t find this, it’s probably fees)

T
T (@guest_1829700)
April 11, 2024 21:21
  PD

Curious, did you pay “1040 Current Tax Return – Tax Year 2023” or “1040-ES – Estimated Tax – Tax Year 2024”?

PD
PD (@guest_1830582)
April 14, 2024 05:36
  T

1040 Current Tax Return – Tax Year 2023

the other Justin
the other Justin (@guest_1830048)
April 12, 2024 14:52
  PD

I assume you filed by mail? I do not see the option to e-file (TurboTax) with PayPal. What was the significance of paying through PayPal instead of directly with your Cash+ card?

T
T (@guest_1830174)
April 12, 2024 19:43

No, paid on the ACI payments site directly, selecting PayPal as the payment method. The site is https://fed.acipayonline.com/, but you shouldn’t ever put your payment info into a random link someone gave you. Instead go to https://www.officialpayments.com/fed/ from the Fees table above and it will redirect you.

sg77
sg77 (@guest_1830178)
April 12, 2024 20:19

It has nothing to do with how you file. Read the comments in this thread: https://www.doctorofcredit.com/a-complete-guide-to-paying-your-taxes-with-a-credit-card/#comment-1816444

jpv
jpv (@guest_1828708)
April 10, 2024 04:47

Remember the US Bank Cash+ is capped at $2k 5% cashback spend per quarter.

Jon
Jon (@guest_1829282)
April 11, 2024 02:36

Good point! Thanks!

JD
JD (@guest_1830257)
April 13, 2024 02:02

Does anyone know what happens if you make a charge that pushes you over $2k? Do they pro-rate it like BoA, or do they just reduce the reward for subsequent transactions? Asking for a friend ( Puli H ), lol
Also, has anyone had their statement close and the reward actually pay out yet?

LF
LF (@guest_1825545)
April 3, 2024 23:14

I am trying to pay my taxes via ACI using PayPal and my US Bank Cash+, but whenever I click the PayPal option, I receive the message “No eligible cards on file. Please add a new payment method.” My Cash+ card is in my PayPal wallet – it is the only card attached to PayPal and is set as the preferred payment method. Any ideas how I can get ACI to recognize it? Thanks!

Edit: Nevermind – had to set it as the default payment method for autopay.

JD
JD (@guest_1824481)
April 2, 2024 10:46

Another DP confirming ACI payments using Paypal code as utility for USB Cash+.
On a related note, does anyone happen to know if the ability to make 4868 Extension payments at ACI disappears after the 4/15 filing deadline?
Badman c3 sg77

c3
c3 (@guest_1824511)
April 2, 2024 11:35
  JD

Stops at all 3 processors, not just ACI.

JD
JD (@guest_1824512)
April 2, 2024 11:38
  c3

Thanks, knew I could count on you lol

Tony
Tony (@guest_1824731)
April 2, 2024 17:00
  JD

Does it only for USB cash+ card, or any other credit cards using paypal will also shows as utility?

Queue_Underflow
Queue_Underflow (@guest_1824761)
April 2, 2024 17:30

Works for Chase too, and I would bet pretty much any other Visa or Mastercard. Amex may use different MCCs.

JD
JD (@guest_1824800)
April 2, 2024 18:16

Someone reported Elan max cash (basically same card as USB cash+) also coded as utility.

Tony
Tony (@guest_1824366)
April 2, 2024 02:45

I received an email from Chase saying “Receive a $15 statement credit when you spend $100 or more with your Chase Freedom credit card in select bill pay categories”. There is a category as “utility”, so I want to use the Chase Freedom card to pay the tax. Should I pay on a third-party website by paying through PayPal? Paypal links to this credit card? I saw some comments earlier saying that paying through PP can make the category as utility.