This time of year, most of us located in the United States are either in the process of preparing our tax documents, working on our tax return or talking with our accountant. Or, if you’re really on top of things, maybe you’ve already got things all filed and are ready for next year. If you’re in the unenviable position of needing to make a payment with your tax return, or need to make estimated quarterly payments for next year, today we’re going to take a look at if you can pay your taxes with a credit card.
Should you pay your taxes with a credit card?
To answer the question of if you can pay your taxes with a credit card – yes, you definitely can. You’re not able to pay your taxes for FREE with a credit card though – all of the methods that we will talk about in this guide for whether you should pay your taxes with a credit card comes with fees of around 2% or more. In most situations it is probably not worth it to pay the fees in order to pay your taxes with a credit card, though later on in the article we’ll look through some situations where it makes sense.
Paying taxes directly through the IRS
The IRS does accept payment directly, but you can not pay your taxes with a credit card directly to the IRS. If you want to pay your taxes directly to the IRS, one way to do it is by paper check (by mail). Using IRS Direct Pay, you can also pay your taxes to the IRS directly from your checking or savings account without any additional fees. Depending on how much you need to pay to the IRS, you may be able to set up an installment payment as well.
4 ways to pay your taxes with a credit card
Even though you can’t pay your taxes directly with a credit card to the IRS, the IRS does partner with a few different websites in order to make that possible. The IRS’s pay your taxes article lists 3 specific partners that will allow you to pay your taxes with a credit card:
- PayUSAtax – $2.55 fee to pay with a debit card or 1.96% to pay with a credit card
- Pay1040 – $2.58 fee to pay with a debit card or 1.87% to pay with a credit card
- OfficialPayments – $2.00 to pay with a debit card ($3.55 if the payment is over $1000) or 1.99% to pay with a credit card
You can use either of those 3 payment processors to pay online through the processor’s website or over the phone. No part of the processing fee goes to the IRS. It’s worth pointing out that “Official Payments” is just the name of the company and not an “official” IRS payment source other than that it is one of the options.
Another option would be bill paying services like Plastiq which allow you to make any type of payments with a debit or credit card, even ones (like the IRS or other state and local governments) that do not generally take credit cards. The way these bill paying services work is that they process your credit card payment and then send the payment on to your recipient, either electronically or via a paper check through the mail. Plastiq generally charges a 2.5% fee for payments with a credit card, though they often offer promotions either for signing up or for making recurring payments that can lower your total fees. Plastiq is currently offering a promotion where you can get 500 fee-free dollars after sending payments of $500 through this link.
When does it makes sense to pay your taxes with a credit card
As we mentioned earlier, it generally doesn’t make sense to pay fees of 2% or so to pay your taxes with a credit card when you can pay via check or bank account directly to the IRS for free. Because you can pay your taxes directly to the IRS via a checking or savings account, speed of payment is not a factor, so the only reason I can think of to make a credit card payment for your taxes is if you are getting more back in rewards than you are paying with fees:
- A 2% cash back card like the Citi Double Cash would allow you to get a slight profit after processor fees.
- If you’re in the first year of having a card like the DiscoverIt miles (which doubles all of your cash back rewards for the first year), then you’ll earn 3% on your purchase.
- When you are able to redeem credit card points for more than average, then even a card like the Chase Freedom Unlimited (1.5 Ultimate Rewards per dollar spent) or the American Express Blue for Business (2 Membership Rewards per dollar spent) might make sense.
- If making a large tax payment can help you meet the minimum spending requirement for a new credit card, that might also be an option. Depending on the amount you’re paying, you could potentially split your credit card payment among multiple cards.
Remember too that if you are paying taxes for a business that the processing fees for paying your taxes with a credit card are generally tax-deductible. That will further lower your true cost of paying your tax payment with a credit card and potentially change the calculus for whether it makes sense for your situation.