Friday, November 25, 2022

Can I Pay Irs With Credit Card

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Different Ways To Pay Your Taxes

How to pay your IRS taxes online using Credit or Debit Card 1040 PayUSATax Pay1040 OfficialPayments

If you owe taxes to the IRS, there are several ways to make your payments. Most people opt for one of the following:

  • You can make a direct payment from your bank account and there are no fees imposed for the transaction.
  • You can wire the money from a bank account, although this option usually incurs a fee.
  • You can mail a check or money order to the IRS.

If you need a little more time to pay your taxes, you can file an extension with the IRS or set up an installment agreement that includes a payment plan. You will, however, be expected to pay penalties and interest on that payment plan. You can also pay your taxes with a debit card. While the fee for that is minimal, you wont earn any valuable travel rewards or cash back.

Fortunately, the IRS lets you pay your tax bill with a credit card through several third-party payment processors. But be warned these companies are allowed to tack on their own fees to your payments. You can see a list of these companies and their convenience fees at this link to the IRS website.

Alternatives To Paying Your Taxes With A Credit Card

As you can see, there are many downsides to paying your taxes with a credit card.

So if you dont have enough money in your bank account to pay your tax bill, you should consider signing up for a payment plan with the IRS.

By doing this, you could pay less interest than you would with a standard , and you also wont affect your credit utilization and scores.

Comparing Federal Tax Payment Options

The first thing to understand about paying taxes with a credit card is that this transaction will not be free. Third party payment processors charge fees to process transactions and submit payments to the Internal Revenue Service and they charge additional fees for the convenience.

When it comes to federal taxes, the IRS makes things easy by providing information about paying a tax bill on its own website. The IRS also authorizes three companies to process credit card payments for federal taxes.

The graphic below shows the three companies authorized to accept payment for a federal tax bill along with the respective fees they charge.

There are a few additional details to note about paying your federal taxes with a credit card, per the IRS:

  • Tax payments over $100,000 may come with special requirements and these payments must be processed over the phone instead of online.
  • Different types of tax payments come with a maximum number of times you can pay with a credit card each year.
  • Employers federal tax deposits cannot be paid with a credit card.

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Paying Debt With Debt

As a personal finance journalist, I cant stress enough how counterproductive it is to pay debt with borrowed funds. If you want to get financially ahead you have to pay your bills with cash that you have in the bank. The interest fee charged on credit card debt, some as high as 28%, can easily balloon your costs if you dont pay before the credit card statement due date.

When Does It Make Sense To Pay Your Taxes With A Credit Card

How Do I Pay The Irs With A Credit Card

If you qualify for a card that actually earns you more rewards than the fees you’d pay, charging your taxes may be worth doing. Say your card pays you 2.5% back. If you’re paying $10,000 in taxes and incur a 1.96% fee for charging them, you’d still end up with $54 in rewards. Since it only takes a few seconds to submit a credit card payment, it may be worth doing. Just be sure to pay your card balance in full before incurring interest charges, which would dwarf the value of the small amount of rewards you’d receive.

If you’re trying to land a new cardmember sign-up bonus, paying your taxes on a card could also be a good way to do it. Say you need to spend $2,000 in the first three months to earn a $500 sign-up bonus. Charging your IRS bill could get you there.

If you can’t pay your taxes because you don’t have the money, this may be another circumstance when paying with a card makes sense. If you can obtain a card with a 0% promotional interest rate on purchases for a period of time , you’d buy yourself time to pay your taxes off interest-free. This could be cheaper than an IRS payment plan or personal loan, as long as you’re confident you can pay the card in full before you owe interest at the standard rate.

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What If I Dont Have The Funds To Pay My Taxes

Forget cash back or rewards points for a secondmany Canadians want to use their credit cards to pay taxes because they might not currently have the cash available for a direct debit to their bank account. This is a viable strategy in theory, since a credit card provides a few weeks to pay off your balance before you have to pay any interest. But this is only a good idea if you will definitely have the cash available by the time your credit card statement is due.

Remember, most credit cards charge an average interest rate of 19.99% , which is quite high. By comparison, do you know how much the CRA charges in interest for late payments? Just 1% per month that youre late, up to a maximum of 12% interest after 12 months. That is likely much lower than the interest you would pay with your credit card.

Were not advocating that you slack off on paying whatever you owe the CRA, but in the hierarchy of debt it might make sense to first focus your financial energy on more pressing, high-interest debts you might have. Keep in mind that the CRA does offer an RC4288 Request for Taxpayer Relief where you might qualify for a monthly tax installment payment schedule where the interest fees are waived. We should also note that the CRA charges a 5% late filing penalty right away, so you should never miss the deadline to file even if youre currently unsure how youll pay any taxes owed.

Using A Rewards Credit Card To Pay The Irs

Paying the IRS with a credit card can result in additional fees, but some savvy credit card holders are making back the cost in the form of rewards.

Will Woodard, Certified Financial Planner at DareCapital.com paid his taxes with one rewards credit card in order to reap the rewards. For him, the rewards outweigh the fees.

Using one card and paying it off simplifies expense tracking and builds rewards points, explains Woodard.

But this strategy only works if you pay the bill in full each month. Also, its important to understand the rewards structure on your card and how it compares to the fees you may incur. Are you making a profit by using a credit card or are you losing money?

If you do choose to use your credit card, consider a cash back or travel rewards card that offers a high return. Consider Chase Freedom Unlimited®, which offers 1.5% cash back on purchases.

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How Do I Recognize Email Spoof

A spoof email pretending to be from Pay1040 typically contains a link that takes you to a fake Web site that requests that you sign in and submit personal and account information. Pay1040 does not require you to enter information on a page that cannot be accessed from the Pay1040 site. When possible, you should avoid clicking links. Instead of clicking the link, you should copy the address and paste it into the address bar of your web browser. While Pay1040 may send email that contains links, the links are provided for your convenience only. You will not be required to submit sensitive information if a direct link is provided to a Pay1040 page. Pay1040 does not send you email that includes attachments, or ask you for sensitive information through email. Pay1040 will personalize your emails using the “primary first name” you entered.

Citi Double Cash Card

Can you pay your taxes with a credit card?

The Citi Double Cash card earns 2% cash back . Earning a total of 2% cash back means that youre sure to get a slight cash profit no matter which payment provider you use. Even better, this card doesnt have an annual fee.

You can also convert your cash back into Citi ThankYou points if youve got either the Citi Premier® Card or the Citi Prestige® Card . Citi ThankYou points are worth 1.7 cents each per TPG valuations meaning youll earn an effective 3.4% back, netting you a value of 1.53 cents per dollar after the 1.87% fee.

The information for the Citi Prestige has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

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Should I Pay My Taxes With A Credit Card

Now that you understand all your payment options, youll have to decide which one makes the most sense for you.

As an example, lets say you have a $3,000 tax bill that you plan to pay off over six months. Heres what each strategy would cost :

  • 18% APR credit card with 2% cash back: Since the 1.98% credit card processing fee and 2% cash back basically cancel each other out, youd pay 18% interest x $3,000 over six months = $159.
  • 0% APR credit card: You wouldnt pay any interest just the 1.98% credit card processing fee x $3,000 = $59.40.
  • Installment agreement: Youd pay a $31 setup fee + $45 + $82 in interest = $158.

Obviously, the 0% APR credit card comes with the lowest fees. But this option is only available if you can get approved for a new credit card, and will only save you money if you can pay off the entire bill before the intro APR period ends. Youd also need to be vigilant about making your monthly payments, as missing just one could cause your card to switch to a very high penalty APR.

Alternatively, if you could pay your tax bill off over four months instead of six, you should consider the short-term payment plan. With that, youd owe $50.52 in interest, plus $30 in late fees, for a total of $80.52.

If, however, youre simply interested in the rewards and convenience of making tax payments with a credit card, then at least make sure the following requirements are met:

Best 0% APR Credit Cards

Paying Federal Taxes With A Credit Card

Most taxpayers can pay their federal tax liability with a credit card. That includes both individuals and businesses. If your tax return is eligible â not all types of tax returns are, depending on the form you filed â you can make payments by credit card before you file, after your return is accepted, or if you receive a past-due notice.

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For 0% Introductory Apr:

Capital One Quicksilver Cash Rewards Credit Card: The Capital One Quicksilver Cash Rewards Credit Card starts consumers off with the ability to earn a welcome bonus: $200 cash bonus after spending $500 on purchases within 3 months from account opening. Cardholders also earn a flat 1.5% cash back on every purchase, and have a $0 annual fee. Finally, this card offers a 0% intro APR on purchases and balance transfers for 15 months 14.99%-24.99% variable APR after that.

Chase Freedom Flex: Also consider the Chase Freedom Flex, which offers a 0% Intro APR on Purchases for 15 months followed by a variable APR of 14.99% – 24.74% Variable based on creditworthiness. This card also offers a welcome bonus: $200 bonus after spending $500 on purchases in the first 3 months from account opening and 5% cash back on grocery store purchases on up to $12,000 spent in the first year.

Cardholders also earn 5% cash back on eligible purchases in rotating categories, 5% on travel purchased through Chase Ultimate Rewards®, 3% on dining and drugstores, and 1% on all other purchases. Best of all, theres no annual fee.

Buy Some Extra Time To Pay Your Taxes

Can I Pay The Irs With Credit Card

One of TPGs 10 commandments for earning credit card rewards is never to pay interest charges. Its paramount that you never bite off more than you can chew. When paying your taxes with a credit card, make a note of when the first day of your new statement period begins on the card youre looking to use. This way, you may have up to 30 days until your statement closes and nearly 60 days until you need to pay off your balance in full.

Some for an introductory period on new purchases, which can provide you with 12-18 months of interest-free payments on your tax bill. Note that you must pay off the entire balance in full before the promotional period ends or risk exorbitant interest charges.

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Comparison Of The Best Credit Cards For Tax Payments

Below, find the general earning rates for the top cards to pay your taxes, along with TPGs valuations of the rewards you can earn.

Ive listed the general earning rate for our choice of the top cards to pay your taxes. The potential return is the potential earnings based on TPG valuations and maximizing the earning through the method mentioned in the Caveat section.

Card
1.83% n/a

If youre able to claim your convenience fees as a tax deduction on your business , your gains would be even greater.

Now for the details on each of these cards.

Make An Irs Payment On Mobile Via Irs2go

How it works:IRS2Go is the IRS official mobile app. You can use it to make payments via the mobile version of IRS Direct Pay for free or with a debit or credit card .

Cost: App is free

Pros:

  • Mobile-friendly.

  • Can generate login security codes for certain online services .

  • Can also use the app to find free tax software and tax help.

Cons:

  • Only Direct Pay, credit card and debit card payment methods are mobile-friendly.

  • Using Direct Pay via the app is free, but paying with debit or credit cards still comes with a processing fee.

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For The Welcome Bonus:

The Platinum Card® from American Express:The Platinum Card® from American Express currently has the following welcome offer: 100,000 membership rewards points after spending $6,000 on purchases on the card in the first 6 months of card membership. Plus, earn 10x points on eligible purchases on the card at restaurants worldwide and from purchases at Shop Small locations in the U.S., on up to $25,000 in combined purchases during the first 6 months of card membership.

Cardholders also earn 5 membership rewards points per dollar for flights booked directly with airlines or with American Express Travel on up to $500,000 per calendar year, 5 points per dollar on prepaid hotels booked with American Express Travel and 1 point per dollar on all other eligible purchases.

Theres a $695 annual fee, but cardholders receive up to $200 in Uber Cash credits for eligible domestic Uber expenses each year when they link their Platinum card to their Uber account, Priority Pass airport lounge membership with enrollment, access to American Express Centurion Lounges, access to Delta SkyClubs when flying Delta same-day, a credit for Global Entry or TSA PreCheck, Hilton and Marriott Gold status with enrollment and more.

Chase Sapphire Preferred® Card: The Chase Sapphire Preferred® Card is one of the top travel credit cards each year, and for good reason. For starters, new cardholders can earn 60,000 bonus points after spending $4,000 on purchases in the first 3 months from account opening.

You Can Pay Your Taxes With A Credit Card

2290Tax Credit Card Payment Instructions

Will you owe money when you file your taxes for 2020? If you’re looking at getting a tax bill, you may be wondering if it’s possible to use a credit card to pay the IRS. And the short answer is yes, you can pay your taxes with a credit card.

However, before you get out your card, there are a few things you need to know because doing so isn’t always a good idea.

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In Rare Cases The Rewards Points Might Be Worth More Than The Processing Fees

by John Waggoner, AARP, Updated April 19, 2021

Alamy Stock Photo

En español | Federal income tax returns and taxes owed are due May 17, and if you’re staring at a big tax bill, you might be tempted to charge it on your credit card. That way, at least, you’d reap some rewards points as your money flies off to Uncle Sam. But the decision is more complicated than you might think.

The Internal Revenue Service has contracted with three companies to process federal income tax payments by credit card. They each charge a fee, ranging from 1.96 percent to 1.99 percent, to process your payment.

Clearly, if your credit card offers two percent cash back on purchases, you’re not going to make much money. You’d barely be coming out ahead, says Ted Rossman, industry analyst at creditcards.com. On a $10,000 tax bill, you’d get $200 back on a card that offered two percent cash back on purchases, but pay between $196 to $199 in fees. The net gain of $1 to $3 might not seem worth it, although at least you would effectively eliminate the processing fee.

If you have a rewards card and get points for your purchases, however, you may be able to get some benefit from charging your taxes. Here again, you should make sure that the amount you pay in fees to the tax processing service is less than the value of your points.

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