Taxes can feel like an unavoidable part of life while parting with your hard-earned money. As tax season unfolds, the quest for seamless filing and payment solutions gains momentum.
The IRS, aware of this, has introduced many online tools and filing options to streamline the process. Encouraging online tax payments, the IRS has become part of partnerships to ensure accessibility, security, and ease.
Embarking on the tax season journey prompts various considerations — a lesser-known yet potentially lucrative avenue emerges as a credit card, and one intriguing question often arises: Can you pay your taxes with a credit card, and is it a prudent choice?
This option opens doors, particularly for those proficient at playing the rewards game, with enticing welcome bonuses that can soar up to a thousand dollars or more.
Imagine paying taxes with credit card and, in return, racking up rewards like points, miles, or cash back.
It offers a lifeline for those moments when immediate funds are scarce or when the allure of earning rewards points is too tempting to resist. Sounds intriguing, doesn’t it?
However, it’s not all sunshine and rainbows. While the IRS does permit credit card payments for taxes, the potential drawbacks, including processing fees and interest, could overshadow the appeal of using this method.
To fully capitalize on this approach, it’s crucial to assess whether the rewards earned outweigh the fees incurred.
Additionally, the key lies in settling your credit card bill in full before interest accrues, as any interest charges can swiftly diminish the value of hard-earned rewards.
In this article, we’ll discuss the benefits to help you decide if paying taxes with your credit card is a wise move, explore the best credit card for tax payments, uncover potential fees, understand the types of taxes eligible for credit card payments, and evaluate the alternatives.
How to pay taxes with a credit card?
Paying taxes with a credit card can offer a convenient and flexible solution for managing your financial obligations. To initiate this process, you typically need to use an approved payment processor authorized by the Internal Revenue Service (IRS). After selecting a suitable payment platform, input your tax details, including the amount owed and relevant personal information.
Ensure that the payment processor accepts credit card transactions and operates securely. While this method may incur processing fees, it allows you to spread the financial burden over time, offering a valuable option for those seeking additional time or leveraging credit card rewards.
Always verify the terms and fees associated with your chosen payment platform before proceeding.
While considering to pay taxes with credit card, calculate your owed amount to determine the necessary credit coverage before filing. Typically, you can make two federal tax payments per year using a credit card (quarterly for freelancers).
Whether through phone or online channels, the steps for using a credit card to pay taxes are relatively straightforward.
By Phone
If you prefer to pay your taxes by phone using a credit card, you have the option to do so through dedicated lines provided by each of the three card processors:
- PayUSAtax: 844-729-8298
- Pay1040: 888-729-1040
- ACI Payments: 888-272-9829
Ensure you have your credit card and tax return information ready when making the call.
Online
While e-filing through tax software like TurboTax and H&R Block also allows credit card payments, be cautious as they may entail higher rates.
To avoid these higher fees, you can use one of the three approved credit card processors even when filing with a tax service – Pay1040, PayUSAtax, and ACI Payments.
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To conveniently settle your tax payment online, visit the IRS website and select the ‘Pay’ option at the top of the homepage.
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Then, opt for the ‘Pay by debit or credit card’ feature.
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On the subsequent page, choose a card processor for your payment processing.
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After selecting a processor, click the ‘Make a Payment Button,’ which redirects you to the processor’s website to finalize your transaction.
Additional steps include specifying the type of taxes and entering taxpayer information, payment amount, and credit card details.
The IRS payment page lists approved credit card processors and their associated fees.
| Processor | ACI Payments, Inc. | Pay1040 | PayUSATax |
|---|---|---|---|
Payments Accepted |
Visa, Mastercard, Discover, American Express, STAR, Pulse, NYCE, PayPal, Click to Pay |
Visa, Mastercard, Discover, American Express, STAR, Pulse, NYCE, Accel, AFFN, Cirrus, Interlink, Jeanie, Shazam, Maestro, Click to Pay, PayPal, Pay with Cash |
Visa, Mastercard, Discover, American Express, STAR, Pulse, NYCE, Accel, PayPal, Click to Pay |
Minimum Fee |
$2.50 |
$2.50 |
$2.69 |
Fee as a % of Total Bill |
1.98% |
1.87% |
1.85% |
Processing Fees on a $500 Tax Bill |
$9.90 |
$9.35 |
$9.25 |
Processing Fees on a $5,000 Tax Bill |
$99.00 |
$93.50 |
$92.50 |
Processing Fees on a $20,000 Tax Bill |
$396.00 |
$374.00 |
$370.00 |
Here are four tips for paying taxes with a credit card:
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Know your Credit Limit
Understand your credit limit before charging your tax bill to a credit card.
Be cautious not to exceed your credit limit, as doing so may result in additional penalties or negatively impact your credit scores.
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Use Multiple Credit Cards Wisely
Consider using multiple credit cards to avoid exceeding your credit limit.
Utilizing different cards can also help maximize sign-up bonuses.
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Avoid Interest Charges
Be cautious about making charges on a rewards credit card that you cannot pay off in full.
Accumulating interest charges often outweigh the value of the rewards earned.
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Adhere to IRS Guidelines
Keep in mind the IRS limits the number of credit card payments per tax form in a calendar year.
In most instances, you are allowed a maximum of two credit card payments per year for a single tax form.
The Best Credit Cards for Paying your Taxes
While paying taxes with a credit card can be a strategic move, the key lies in selecting the right card for the job, making a significant difference.
Whether you’re eyeing those tempting welcome bonuses or aiming for continuous rewards, the choice matters.
Several credit cards offer benefits like rewards, cash back, or introductory 0% APR periods for tax payments.
Here are five top choices that can enhance your tax-paying experience and potentially even earn you some rewards:
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Capital One Quicksilver Cash Rewards Credit Card - Best for Unlimited Cashback
Quicksilver Cash Rewards Card stands out for paying taxes with its flat accelerated cashback.
Offering a straightforward 1.5% cashback on every purchase, including tax payments, it ensures a reliable and hassle-free reward system.
With no annual fee, it’s an excellent choice for those looking to earn consistent cash back without the complexity of rotating categories.
New cardholders can benefit from $200 sign-up bonus, Capital One travel perks, and 0% intro APR for 15 months on purchases and balance transfers, making it a compelling option for maximizing returns while covering tax expenses.
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Blue Business Plus Credit Card from American Express - Top Choice for Everyday Business Spending
The Blue Business Plus Credit Card is another great choice for paying taxes, thanks to its flat accelerator points system.
With no annual fee, this card offers 2X Membership Rewards points on the first $50,000 in purchases each year, making it an ideal option for business owners handling tax payments.
The flexibility of Membership Rewards points allows for diverse redemption options, including travel, merchandise, and more.
Coupled with perks like an extended warranty, a welcome bonus of 15,000 Membership Rewards Points, and travel accident insurance, it provides comprehensive value for business-related expenses, including tax payments.
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Capital One Venture Rewards Credit Card - Best for Versatile Travel Rewards
The Capital One Venture Rewards Credit Card is a top contender for paying taxes, offering a flat 2X miles per dollar on every purchase, including tax payments.
This card provides a straightforward and rewarding experience with a welcome bonus of 75,000 miles.
The miles earned can be easily redeemed for travel-related expenses, making it an excellent choice for those looking to offset tax costs with future travel.
It also boasts additional benefits like a $100 credit for Global Entry/TSA PreCheck, no foreign transaction fees, and 5X miles on hotels and rental cars.
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Platinum Card from American Express - Ultimate Luxury and Travel Privileges
The Amex Platinum Credit Card emerges as a powerful option for paying taxes, offering more than just rewards.
While it may not have a flat accelerator for tax payments, its appeal lies in the prestigious perks, and becomes an enticing choice for managing tax obligations.
Cardholders can leverage the Membership Rewards program to add points through tax payments, especially for those aiming to qualify for Amex Centurion lounges and elevate their travel experience.
Its benefits include airport lounge access, $200 hotel and airline fee credit, and elite status with various hotel and car rental programs.
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Chase Sapphire Preferred Card - Ideal for Versatile Travel Perks
The Chase Sapphire Preferred Credit Card takes the spotlight for paying taxes, offering valuable rewards and flexibility.
While not featuring a flat rewards rate for tax payments, its strength lies in the Chase Ultimate Rewards program and its various travel partners.
Cardholders can earn points on tax expenses and use them for travel through the Chase Ultimate Rewards portal, enjoying enhanced redemption value.
With a generous sign-up bonus of 60,000 points, 3x points on dining, and 5x on travel, the card provides a strategic approach to offsetting tax costs while unlocking exciting travel opportunities.
| Credit card |
Uthrive rating
|
Intro offer | Rewards rate | Annual fee | Learn more |
|---|---|---|---|---|---|
|
Terms Apply |
Rating
4.7/5
|
Intro Offer bonus_miles |
Reward Rates 1.5% - 5% Cash Back |
Annual Fees annual_fees |
|
|
Terms Apply |
Rating
4.8/5
|
Intro Offer bonus_miles |
Reward Rates 1x - 2x Membership Rewards® points |
Annual Fees annual_fees |
|
|
Terms Apply |
Rating
4.7/5
|
Intro Offer bonus_miles |
Reward Rates 2- 5 Miles per dollar |
Annual Fees annual_fees |
|
|
Terms Apply |
Rating
4.8/5
|
Intro Offer bonus_miles |
Reward Rates Earn 5X Membership Rewards® Points |
Annual Fees annual_fees |
|
|
Terms Apply |
Rating
4.8/5
|
Intro Offer bonus_miles |
Reward Rates 3x - 5x total points |
Annual Fees annual_fees |
What is the fee for paying taxes with a credit card?
When figuring out the option of paying taxes with a credit card, understanding the associated fees is crucial.
The processing fees can vary based on your individual circumstances and the credit cards you hold, making it essential to weigh the costs against potential benefits.
For those aiming to maximize credit card rewards and points, strategically using a credit card might offset processing fees.
The fees for paying taxes with a credit card differ depending on the tax and payment processor.
The fees for paying taxes with a credit card typically range from 1.85% to 2.49% of the total payment.
This fee is imposed by third-party processors approved by the IRS to handle credit card transactions.
For instance, TurboTax imposes a convenience fee of 2.49% for credit card payments, while federal taxes through PayUSATax incur a 1.85% fee.
Always remember that the ability and cost to pay state taxes with a credit card can vary significantly across different states.
To make informed decisions, it is advisable to confirm specific fees with your local tax collector and the chosen payment processor well in advance.
Types of taxes you can pay with your credit card
Planning to use your credit card for tax payments? It’s essential to understand the options available and the limitations.
While federal taxes can be conveniently paid with a credit card, additional considerations may apply.
Some states also allow credit card payments for state income and business taxes.
Property taxes can often be paid with a credit card, but it’s crucial to confirm local regulations and fees.
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Federal Tax Payments
You will find all the necessary information about paying a tax bill on the IRS website. Three IRS-approved companies facilitate credit card payments for federal taxes.
However, payments exceeding $100,000 may have special requirements and must be processed over the phone, and you cannot use a credit card for an employer’s federal tax deposits.
Plus, certain types of tax payments have limitations on the annual frequency of credit card payments.
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State Tax Payments
In addition to federal taxes, certain states provide the option to pay taxes using a credit card.
It applies to both state income taxes and business taxes but is available only in states that offer such alternatives.
Payment requirements differ by the taxpayer’s state of residence, along with varying payment processors, resulting in fluctuating fee costs.
For instance, OfficialPayments.com, authorized by the IRS, allows secure processing of payments for state income taxes (excluding business taxes), each with its own fee structure.
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Property Tax Payments
While many counties and cities accept credit card payments for property taxes, some may not offer this option.
Choosing to pay property tax with a credit card usually incurs a convenience fee.
Contact your local tax collector’s office to determine the accepted payment methods in your city or county.
You can make a credit card payment through your property’s jurisdiction’s online portal, with OfficialPayments.com being a common choice in states that allow credit card payments for taxes.
Some locations may offer the in-person payment at the local tax collector’s office.
Benefits of paying taxes with a credit card
Opting to settle taxes with a credit card brings undeniable conveniences and flexibility.
When it comes to settling your tax bill, the decision of whether to use a credit card involves careful consideration of potential benefits and drawbacks.
While paying taxes with a credit card incurs processing fees, there are compelling reasons individuals may find it advantageous.
Let’s explore four notable benefits that could make paying taxes with a credit card a strategic financial move.
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Accumulating Rewards through Points or MilesMany consumers opt to pay taxes with a credit card to leverage the reward-earning potential.
Despite the added fee, certain credit cards offer rewards, such as cashback, travel points, or miles, depending on your card’s reward structure – exceeding the cost.
For example, using a card that provides over 1.85% cash back or equivalent value in points can turn the transaction into a net gain.
Consider cards like Citi Double Cash for solid rates on purchases.
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Securing a Generous Welcome BonusFor those with a significant tax bill, paying with a credit card may unlock substantial sign-up bonuses.
Cards like Chase Sapphire Preferred or Capital One Venture X Rewards Credit Card offer enticing bonuses.
By splitting the tax bill across two cards, individuals may earn significant rewards beyond everyday spending, potentially totaling hundreds or thousands of dollars in return value.
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Interest-Free Period with Introductory OffersPaying taxes with a credit card can act as a short-term interest-free loan, especially when using cards with introductory 0% APR offers. It’s crucial to be mindful of the offer’s duration and plan accordingly.
For instance, Chase Freedom Unlimited and Capital One Quicksilver Cash Rewards provide a 0% introductory APR for 15 months on purchases, allowing individuals to defer the tax payment without incurring interest.
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Reach Critical Spending ThresholdsSome individuals may choose to pay taxes with a credit card to meet important spending thresholds.
It goes beyond welcome bonuses and could be relevant for achieving elite status with certain travel credit cards as well.
By strategically paying a tax bill, cardholders might bridge the gap to the next status level, unlocking valuable benefits associated with elite status like- free wifi in flight, complimentary breakfast at hotels, and bonus rewards.
Alternatives to paying taxes with a credit card
When it comes to settling your tax bill, paying with a credit card is just one option.
Various alternatives cater to different preferences and circumstances. It’s essential to explore these alternatives to choose the one that aligns with your financial situation.
Whether it’s the simplicity of direct payments, the convenience of debit cards, or the traditional approach of mailing a check, the IRS offers a range of solutions to help you fulfill your tax obligations.
Here are six alternatives to paying taxes with a credit card:
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Direct Bank Payment
You can make a direct payment from your bank account through the IRS website or IRS2Go app, and the IRS won’t charge any extra fees for this type of payment.
It’s a straightforward and fee-free method for those who prefer the simplicity of direct transactions. Note that Direct Pay limits users to two payments in 24 hours.
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Debit Card Payment
Paying with a debit card is another option, offering a minimal processing fee ranging from $2.20 to $2.50.
However, it’s important to note that debit card payments are linked directly to your cash funds, requiring sufficient balance for the transaction.
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Electronic Funds Withdrawal (EFW)
EFW allows you to create a digital check for payment without any additional enrollment fees.
But be sure to check with your banking institution for potential fees.
It’s a convenient option if you’re using tax preparation software or the services of a tax professional.
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Electronic Federal Tax Payment System (EFTPS)
EFTPS is a free service provided by the IRS, allowing individuals and businesses to handle tax payments.
Although enrollment is required, it offers flexibility for making payments.
Once registered with a bank account and associated address, users receive an ID number and password, enabling payments at any time throughout the year.
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Paying with Cash
For those who prefer using cash, the IRS has partnered with retail stores like 7-Eleven and CVS Pharmacy, subject to a processing fee of $1.50 (ACI Payments) or $2.50 (1040.com).
It has a limit of $500 per payment, but users can make multiple payments daily.
The IRS website provides step-by-step instructions for cash payments.
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Mail a Check
While online payments are encouraged, the traditional method of sending a check, money order, or cashier’s check by mail is still accepted.
Ensure the check includes personal details, such as name, address, phone number, Social Security number, tax year, and tax form number.
Timely mailing and tracking are advisable to avoid potential issues.
The Bottom Line
In conclusion, paying taxes with a credit card offers the luxury of ease and potential rewards, but it’s crucial to weigh the associated fees and interest rates. While it can be a strategic move to earn cash back or points, financial responsibility is paramount.
Approaching this option with a strategic mindset, thorough research, and a clear understanding of the pros and cons can yield benefits.
By staying informed, meeting payment deadlines, and calculating the overall value, you can leverage the opportunity to earn valuable points and perks during tax season.
Consider your card’s benefits, the nature of your tax liability, and whether the rewards outweigh the costs.
Alternatives like sending a check and Electronic Funds Withdrawal provide simplicity and may be more cost-effective.
Ultimately, the decision to pay taxes with a credit card should align with your financial goals.
FAQ
Can you pay federal taxes with a credit card?
Yes, you can pay federal taxes with a credit card. The IRS authorizes specific companies, such as Pay1040, PayUSAtax, and ACI Payments, to process credit card payments for federal taxes.
Can I pay taxes with a credit card?
Absolutely YES! You can easily pay taxes with a credit card.
Various payment processors, authorized by the IRS, facilitate this option for both federal and state taxes
What is the fee for paying taxes with a credit card?
The fee for paying taxes with a credit card depends on the payment processor.
These fees typically range from around 1.85% to 1.99%.
Can you pay the IRS with a credit card?
Yes, you can pay the IRS with a credit card through authorized third-party payment processors.
However, be aware of additional fees imposed by these processors for the convenience of credit card transactions.
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