If you have a larger tax bill than you expected, you may be trying to figure out how you'll pay Uncle Sam, such as turning to a credit card.

Can you pay taxes with a credit card? Yes — but there is a catch: using a credit card can incur added fees.

Paying taxes with a credit card

It is possible to pay your federal income tax bill with a credit card, and most states allow you to use a major credit card to pay your taxes too.

However, the IRS does have some restrictions on how often you can use a credit card for certain tax types. For example, if you file a tax return Form 1040 — the U.S. Individual Income Tax Return — you can make two credit card payments per year to pay the tax due. If you pay quarterly estimated taxes, you're limited to two credit card payments per quarter.

How to pay taxes with a credit card

Although it is possible to pay your tax bill with a credit card, you can't use a credit card to directly pay the IRS. Instead, you have to make a payment through one of the third-party processors designated by the IRS to handle credit card payments:

• payUSATax

• Pay1040

• ACI Payment, Inc.

All of them accept credit cards from the major credit card networks, including American Express, Mastercard, and Discover.

These companies will process your card payment, but they charge added fees for their services. The fee varies by processor:

• payUSAtax credit card fee: 1.85% (minimum $2.69)

• Pay1040 credit card fee: 1.87% (minimum $2.50)

• ACI Payment, Inc. credit card fee: 1.98% (minimum $2.50)

To make a payment via credit card, visit the IRS site and choose a third-party payment processor. The IRS will redirect you to the company's website, and you can opt to make a personal tax payment or business tax payment.

Read more: Here are 7 free tax filing options

When does it make sense to pay your taxes with credit?

Using a credit card to pay what you owe on your taxes can make sense in the following scenarios:

You need to spend a certain amount to earn a new cardmember bonus

With some credit cards, you can qualify for valuable new card member bonuses when you sign up and spend a certain amount within a specific period.

For example, the Chase Sapphire Reserve® card will give you 60,000 bonus points if you spend at least $4,000 on new purchases within the first three months of account opening — a $900 value to put toward travel purchases when you redeem those points through Chase Travel. If you prefer cash-back rewards, the Blue Cash Preferred® Card from American Express has a $250 statement credit welcome bonus when you spend at least $3,000 within the first six months (terms apply; see rates and fees).

If you owe money at tax time, using a new card to pay the bill may allow you to quickly meet the new card member bonus spending requirements. This can be especially useful if you’re worried about meeting the required spending threshold with your regular budget. Because you need to pay taxes regardless, it may be worth the added fee to guarantee your bonus.

You earn a higher rate of rewards

Depending on which credit card you have, you may be able to earn a rewards rate that offsets the third-party processing fees that you pay when you use a credit card to pay taxes.

For instance, the Wells Fargo Active Cash card gives you 2% cash back on every purchase. Alternatively, the Capital One Venture Rewards Credit Card offers 2x miles on every dollar you spend. These are both among the top flat-rate rewards you’ll find today.

If you had a $1,000 tax bill and used your Wells Fargo card to pay it through payUStax, you’d pay $18.50 in fees (1.85% of the tax bill). But because the card gives you 2% cash back, you’d get $20 in cash-back rewards. By using your credit card, you’d earn enough rewards to offset the processing fees.

You have a card with a 0% APR promotion

Unfortunately, surprise tax bills can happen. If you owe a substantial amount of money and don’t have the cash on hand to pay it outright, using a credit card with a promotional APR offer can make the cost more manageable.

For example, the Capital One Quicksilver Cash Rewards Credit Card boasts 0% APR for 15 months on new purchases, after which the standard APR applies. The Blue Cash Everyday® Card from American Express also offers the same 0% on new purchases for 15 months (then a variable APR of 19.24% to 29.99%; terms apply — see rates and fees). If you use either of these cards to pay your taxes, you’ll be able to make payments against your debt for over a year without worrying about interest charges.

If you use a card with a 0% APR promotion, aim to pay off the bill in full by the end of the promotional period. Otherwise, the normal purchase APR — which can be well into the double digits — will apply.

You're at risk of missing the payment deadline

If you forgot about your tax bill and are at risk of missing the payment deadline, using your card is one of the quickest ways to make a payment and ensure it's processed in time to avoid late fees.

When you use a credit card to pay your taxes, the third-party payment processor sends you a confirmation with a time-stamped proof of payment for your records.

Read more: How to file a tax extension (Just remember you still have to pay by the deadline)

What to know before using your card to pay your tax bill

Although there are some benefits to using a credit card to pay what you owe at tax time, there are some significant downsides to keep in mind:

Added fees apply

As mentioned earlier, all of the third-party processors charge fees to handle tax payments made with a credit card. Depending on how much you owe and the processor, the fee can be as high as 1.98% of your tax bill.

To put that in perspective, here is how much you'd pay if you had a tax bill of $500, $1,000, $5,000 or $10,000:

As you can see, the processing fees can add to your overall repayment cost.

Credit card APRs can be costly

Credit cards are a relatively expensive form of credit. As of August 2023, the last available data, the d that charged interest was 22.77%.

If you use your card to pay your taxes and aren’t able to pay off the bill in full by the statement due date, interest will accrue on the unpaid balance. Over time, interest charges can add hundreds or thousands to your cost.

Consider this example: Say you had a $5,000 tax bill. You use your card to pay it, and you go through payUStax. With the processing fee, you charge $5,092.50 to your card (the $5,000 tax bill + $92.50 in fees).

If you only make the minimum required payment for your card and don't use it for any other transactions, it will take you 52 months to pay off the balance, and you'll pay a total of $7,952.43. Interest charges would add over $2,800 to your repayment cost.

If at all possible, only use a credit card to pay taxes if you can afford to pay off the balance in full by the statement due date to avoid costly charges.

It will increase your credit utilization

If you have a large tax bill and use your credit card to pay it, you could increase your balance by hundreds or thousands overnight. If your new balance takes up a significant amount of your available credit, the transaction increases your credit utilization, which accounts for about 30% of FICO score.

For example, let's say you have a credit card with a $1,000 credit limit. You use the card to pay a $500 tax bill. Afterward, you have a $500 balance, so your credit utilization — the percentage of your available credit that you used — is 50%. In general, creditors like to see a credit utilization of 30% or less, so such a high percentage can damage your credit.

FAQS about credit card payments and taxes

Will I be charged a cash advance fee?

If you use your credit card to pay your tax bill, you don't have to worry about paying added cash advance fees or a higher cash advance APR. The transaction is counted as a retail purchase, not a cash advance, so you'll pay the normal purchase APR without added fees.

Can I pay state income taxes with a credit card?

Most states allow you to pay your income taxes with a credit card, but rules and fees vary by state. For example, these states charge the following fees:

• California: 2.3% of the transaction amount

• New York: 2.2% of the transaction amount

• Virginia: 2.3% of the transaction amount

Some states restrict the types of credit cards that can be used. For example, some states only allow the use of a Mastercard or Visa card; if you have an American Express or Discover card, you'll have to use another payment method.

Do I need to mail a confirmation or payment voucher to the IRS?

After making your payment, you don't have to mail a payment voucher or a copy of your payment confirmation email to the IRS. However, you do need to file your tax return or amended return.

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