[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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favo🔗
favo🔗 (@guest_1822092)
March 29, 2024 06:04

I’ve never used a third-party tax payment processor or split tax payments before. Just wanted to make sure I understand it correctly after reading this post.

It seems if I file an extension Form 4868 before 4/16, I can use one of the payment processors for example PayUSAtax and split the payment with two credit cards ( two payments), and later this year when I file Form 1040, if I still owe tax, I can split the payment with two card again (two payments), is this understanding correct?

Just wanted to confirm if the “two payments limit” is for each form or for all forms combined in a year.

Hiro
Hiro (@guest_1821029)
March 27, 2024 21:12

PayPal is running a promo where you can get 300 points (redeemable at $3) for spending $50 or more 3 times so you can get even extra cashback (this might be targeted).

J
J (@guest_1820571)
March 27, 2024 10:40

I’ve been paying my estimated tax payments with Payusatax and I’m positive that all my payments have been showing up as accepted on my IRS online account as I’ve checked in the days following each payment. But I just checked now and it’s only showing one payment for tax year 2023 (from December), the earlier 3 payments disappeared. Anyone else in the same boat? I checked on payUSA’s site and it does show that all the payments were accepted by the IRS and it lists the EFT confirmation number from the IRS.

Hiro
Hiro (@guest_1819981)
March 26, 2024 12:39

My PayPal Cashback Mastercard gives me 3% back when I use it through PayPal. PayUSAtax.com says they charge 1.96% for using PayPal so I should have 1.04% in net gain 🙂

Dad
Dad (@guest_1819839)
March 26, 2024 09:08

What option do I select when filing with Freetaxusa to be able to use these third party processors? It didn’t seem inherently clear to me which one to pick.

Queue_Underflow
Queue_Underflow (@guest_1819894)
March 26, 2024 10:32

Pick the ‘pay later’ option in FreeTaxUSA.

Boozi
Boozi (@guest_1817079)
March 20, 2024 12:19

Splitting over multiple cards. I am trying to understand if the 2 payments per year for 1040 applies to the tax form filed, or is it 2 per person or 2 per processor?
I am filing as married, so each SSN should be allowed 2 payments, correct?
I have to pay aprox 16k in taxes, and I was thinking splitting across 4 cards , for 4k each

Queue_Underflow
Queue_Underflow (@guest_1817097)
March 20, 2024 12:38

The IRS says 2 per year but in practice it’s 2 per processor. Using the secondary spouse would probably work but it’s riskier because if it doesn’t you might have to call the IRS to get the payment applied to the correct account.

Boozi
Boozi (@guest_1817103)
March 20, 2024 12:42

So I can use multiple processors, resulting in 6 total payments?

Queue_Underflow
Queue_Underflow (@guest_1817108)
March 20, 2024 12:44

Yep.

Mark
Mark (@guest_1817739)
March 21, 2024 09:58

Yes, I can confirm that you can use your spouse SSN to double the payments. But it won’t show up on your account. You have to call IRS to relocate the payment. Really a PITA. Not worth it.

Queue_Underflow
Queue_Underflow (@guest_1817756)
March 21, 2024 10:17

Wonder if after you file it would get associated correctly, even if it doesn’t show up on your account initially.

Mark
Mark (@guest_1818261)
March 22, 2024 09:44

I think eventually they could find it manually, but I don’t know if the system will automatically link the payments. All three tax pay agencies said only use primary tax payers SSN, so there must be a reason.

AlBundysBigguns
AlBundysBigguns (@guest_1818345)
March 22, 2024 11:56

Given this, do you happen to know, if when joint filing, can you pay for taxes via any processor (even via TurboTax) where you use P2’s credit/debit card to pay for joint taxes where P1 is head of household?

Mark
Mark (@guest_1822185)
March 29, 2024 09:57

That should not be a problem.

Gerald
Gerald (@guest_1816755)
March 19, 2024 20:17

I can confirm that Pay1040 allows Vanilla Visa payments, and that PayUSATax lets you use Vanilla Visa if you use Visa Click to Pay.

ChannelZ28
ChannelZ28 (@guest_1816528)
March 19, 2024 13:34

Disclaimer: We’re not accountants, this does not constitute tax advice. Please consult a tax professional.”

Thing is, I get better and more detailed information here than I’ve ever gotten from “tax professionals.”

safeway shopper
safeway shopper (@guest_1816517)
March 19, 2024 13:08

Tried to buy a VGC at the local Safeway today where I have doing this for years without issue. Told they are now cash only and can only be purchased from customer service. Anyone else seen this policy or is this just local / store only?

calwatch
calwatch (@guest_1816817)
March 19, 2024 22:50

Definitely store only. I routinely purchase cards from Albertsons/Safeway, although recently they’ve actually asked if I want to open the cards before I purchase them.

The_Heg
The_Heg (@guest_1816475)
March 19, 2024 12:02

New to this. In order to make 4868 extension payments, do I need to e-file Form 4868 first with the IRS? Or can I simply make the payments through the processors and that will automatically trigger a 4868 extension request? I don’t care about the extension, I just want to make 6 additional credit card payments.

JD
JD (@guest_1816489)
March 19, 2024 12:34

“Or can I simply make the payments through the processors and that will automatically trigger a 4868 extension request?”
Yes, this is all you need to do and it will also file an extension request.