Can You Pay Your Tax Bill With A Credit Card?

Paying taxes is an unavoidable reality for most people. As April 15th rolls around each year, many taxpayers scramble to file their tax returns and figure out how to pay what they owe to the IRS. For some, writing a check for thousands of dollars to the government can be a financial stretch. This leads many to wonder – can I just pay my tax bill with a credit card?

The short answer is yes, you can pay your federal income tax bill with a credit card. However there are some important limitations fees, and considerations you need to be aware of before whipping out the plastic. Let’s explore the ins and outs of paying your taxes with a credit card.

Overview of Paying Taxes By Credit Card

Here are some key facts about paying your federal tax bill with a credit card:

• The IRS allows you to use a credit card to pay your individual income taxes, including Form 1040 payments.

• Business taxes, payroll taxes, and estate taxes cannot be paid by credit card.

• The IRS uses third-party processors to handle credit card transactions. You don’t pay the IRS directly.

• There are limits on the amount you can pay by card based on the tax type. The max for Form 1040 is $100,000.

• You will be charged a processing fee by the credit card processor, typically around 2% of the payment amount.

• You still need to file your tax return on time, even if paying by card. The credit card payment does not extend the filing deadline.

• Payments process quickly, often posting to your IRS account within 24 hours.

It’s clear that the IRS does let people pay their 1040 tax bill with a credit card. However, you’ll incur processing fees that can add up, especially on larger balances. You still have to file your taxes by April 15th even if you pay with a credit card.

Credit Card Processing Fees to Expect

If you use a credit card to pay your taxes, you will be charged a processing fee based on the amount of the payment. This fee is not charged by the IRS but by the third-party Here’s an overview of the credit card fees:

• Fees typically range from 1.87% to 1.99% of the tax payment amount.

• There is usually a minimum fee of $2.50 or $2.69 per transaction.

• On a $5,000 tax payment, you would pay around $97. 50 in processing fees at 2%.

• On a $10,000 tax payment, you would pay around $195 in fees at 2%

As you can see, the fees add up quickly at higher payment amounts. You need to decide if the convenience of paying by card is worth the processing fee for your situation. Paying by bank account (ACH) directly avoids the fees.

Limits On Credit Card Tax Payments

The IRS places limits on the amount you can charge on a credit card based on the tax form type:

• For Form 1040 payments, the max is $100,000 per tax period.

• For Form 4868 extension payments, the max per period is $1 million.

• For Form 2350 (estate taxes), the max is $1 million per quarter.

If for any reason your tax bill exceeds the max payment allowed on your credit card, you would need to pay the remainder using another means, such as bank account direct pay.

The credit card processors used by the IRS also have their own internal limits that may be lower, such as restricting transactions over $20,000. So double check on any restrictions if your balance is on the larger side.

How To Pay Taxes With a Credit Card

If you decide paying your tax bill with a credit card makes sense for your situation, here is a step-by-step guide on how to do it:

1. Have your completed tax return handy so you know the exact amount owed.

2. Visit the IRS.gov payments page and select “Pay with Card” option.

3. Pick one of the authorized IRS credit card processors.

4. Enter your tax payment information from your return.

5. Enter your credit card account number and details.

6. Agree to the terms, fees, and card limits.

7. Submit the payment to have it processed.

That’s it! The payment will be processed by the credit card company and the funds transferred to the IRS. Make sure you receive a confirmation email and that the payment is listed on your credit card statement. You still need to submit your tax return separately if you haven’t filed yet.

Tips for Minimizing Fees

If you want to offset some of the processing fees that come with paying taxes by credit card, here are some tips:

• Pay only partial balances by card to reduce fee amounts.

• Use a credit card that offers generous rewards on the spending category.

• Pay your credit card balance in full each month to avoid interest charges.

• Deduct credit card processing fees on business tax payments.

• Compare processor fees to find the best rate for your situation.

While there are certainly fees involved, paying your taxes with a credit card can make sense in certain situations if done strategically. Just make sure to crunch the numbers so you don’t end up spending more than you have to.

The Pros and Cons of Paying Taxes With a Credit Card

Below is a summary of some of the key advantages and disadvantages that come with paying your tax bill via credit card:

Pros

• Allows you to delay cash payment if you pay off monthly
• Can earn rewards like cash back or points on spending
• Provides