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Paying your IRS taxes with a credit card can be a convenient and secure way to settle your tax bill. While it may seem like a straightforward process, there are a few important things to consider before you decide to pay your taxes with a credit card.
It's important to understand that not all tax payments can be made with a credit card. In general, only individual income tax payments can be made with a credit card, and only through authorized IRS payment processors. You cannot use a credit card to pay employment taxes, estate or gift taxes, or any other type of tax.
The easiest way to pay your taxes with a credit card is on the IRS payments website.
Pay IRS with credit card lowest fee
There are fees associated with using a credit card to pay your taxes. These fees can vary depending on the payment processor and the type of credit card you use, but they typically range from 1.87% to 2.25% of the total payment amount. This means that if you owe $1,000 in taxes, you can expect to pay an additional $18.70 to $22.50 in fees.
There are 3 IRS approved payment processors that will process your credit card payment and make the tax payment to the IRS on your behalf.
payUSAtax charges $2.20 if paying by debit card and 1.85% if paying my credit card with a minimum fee of $2.69. Visa, Mastercard, Discover, American Express, STAR, Pulse, NYCE, Accel; PayPal, Click to Pay are all accepted.
Pay1040 charges a minimum of $2.50 for debit cards or 1.87% if paying by credit card with a minimum $2.50 charge. Visa, Mastercard, Discover, American Express, STAR, Pulse, NYCE, Accel, AFFN, Cirrus, Interlink, Jeanie, Shazam, Maestro; Click to Pay; PayPal; Pay With Cash are all accepted.
Finally there is ACI Payments, Inc. They charge $2.20 if paying by debit card and 1.98% if paying by credit card with a minimum fee of $2.50. Payment methods accepted include: Visa, Mastercard, Discover, American Express, STAR, Pulse, NYCE; PayPal, Click to Pay; and Pay With Cash
Can you pay taxes with a credit card?
One potential benefit of using a credit card to pay your taxes is that it can help you earn rewards, such as cash back or points. However, it's important to carefully consider whether the rewards you earn will outweigh the fees you'll have to pay. In many cases, it may be more beneficial to pay your taxes with a debit card or by check, as these methods typically don't have any associated fees.
Keep in mind that paying your taxes with a credit card can impact your credit score. When you make a credit card payment, your credit card company will report the transaction to the credit bureaus. This can affect your credit utilization ratio, which is the amount of credit you're using compared to the amount you have available. A high credit utilization ratio can hurt your credit score, so it's important to keep it below 30%.
One way to avoid this potential negative impact on your credit score is to pay off your credit card balance in full each month. This will ensure that you're not carrying a balance, which can accrue interest and potentially harm your credit score.
It's also important to make sure you're choosing the right credit card for your tax payment. In general, it's best to use a credit card with a low interest rate, as this will minimize the amount of interest you'll pay if you can't pay off your balance in full each month. It's also a good idea to use a card with a rewards program that aligns with your spending habits and goals.
Overall, paying your taxes with a credit card can be a convenient and secure option, but it's important to carefully consider the potential fees and impacts on your credit score before making a decision. It may be more beneficial to use a different payment method, such as a debit card or check, depending on your specific situation.
If you're interested in learning how you can maximize your credit card benefits while you serve in the military, check out my 100% free course: The Ultimate Military Credit Cards Course. We are celebrating our 10,000 graduate of the course.