Posted by The TaxAdvocate Group, LLC

How to Pay Taxes With a Credit Card

How to Pay Taxes With a Credit Card

Despite the idea of paying your taxes using a credit card, it doesn’t always mean that it is a good idea. When you e-file your taxes through online tax services like TurboTax or H&R Block, the IRS allows you to pay with a credit card through third-party partners. Paying taxes with a credit card sometimes could make sense but it isn’t free. 

With a credit card, what kind of taxes can you pay

When you file your taxes sometime between the beginning of the year and April 15, you can pay your annual tax return. One of the most common people who will use a credit card to pay quarterly estimated tax payments are people who have freelance income or self-employed. Paying the income and property taxes with a credit card are allowed in some states, cities, and counties. 

How much you will spend in paying your taxes with a credit card or debit card

To handle tax payments made via credit or debit cards, the IRS works with three payment processors. And when you e-file, there are also options for paying your tax bill with a credit card. 

You can easily pay your taxes with a bank account transfer for free since debit card payments require a small flat fee. That will be a better option in most cases.

You will pay the following convenience fees if you are going to pay your taxes with a credit card through a third-party processor:

  • OfficialPayments- 1.99% fee with a minimum fee of $2.50
  • PayUSAtax- 1.96% fee with a minimum fee of $2.69
  • Pay1040- 1.87% fee with a minimum fee of $2.59

The fees typically start at 2.49% and could be even higher if you pay your taxes with your credit card and you file online through tax software like TurboTax or H&R Block. 

When not to use credit cards in paying taxes

Your ability to pay it off before the statement due date and on your card’s rewards is where you will rely on whether it makes sense to pay an extra fee when filing your taxes. 

You should stop considering using your credit card to pay your taxes if you can’t pay off your balance in full every month. It is better to set up a payment plan with the IRS than paying huge interest charges from your credit card that works around 17% which is the average credit card interest rate (plus the convenience fee too). An IRS payment plan’s interest rate will be around 5% or so.

When you can use your credit cards in paying your taxes

You could be a good candidate to pay your taxes with a credit card if you do pay your balance off in full every month-- but that’s only if the rewards are bigger than the fee. 

For example, you’ll get the equivalent of 2% cashback if you use the Citi Double Cash Card and that is more than the fee! You might also end up getting way more than 1.87% back if you are using your taxes to hit the minimum spending requirement on a credit card's sign-up bonus. 

But you should only use a card if it will get you over the hurdle for a bonus if you don’t get rewards or the value is less than 1.87%, better not to. Or else you will get back lesser rewards but you will spend more. 

Procedure in paying taxes with a credit card

Fast, easy and convenient is what you can say if you will pay your taxes with a credit card. You can head to your preferred payment service like Pay1040 or head to IRS.gov. And when you are there, provide important details such as your Tax ID (Social Security Number or Employer ID Number), billing information, and your credit card number.  

Make sure to have your own copy of the receipt after you pay either print out a copy or save it as a PDF. The typical length of time the IRS would look back if you happen to get audited is usually within three years-- so the IRS recommends holding onto copies for at least within that span of time. 

By using direct ban account transfer, you can pay your taxes the freeway when you are in doubt. 

The TaxAdvocate Group, LLC
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