Should You Pay Taxes With a Credit Card?
I like to think I know more about credit cards than the average person. I’ve written dozens of credit card reviews for Money Crashers, after all, and personally tried out more credit cards than I’d like to admit.
So, I was surprised and a little embarrassed to learn for the first time recently that the IRS permits taxpayers to make federal tax payments by credit card.
Virtually all individual filers are eligible to pay their year-end taxes by credit card. Freelancers and independent entrepreneurs responsible for quarterly estimated tax payments can pay those with plastic too. With some important caveats, particularly around withholding taxes, business owners are eligible to pay tax on credit.
In the following sections, we’ll take a closer look at:
Paying your federal taxes by credit card isn’t rocket science. This IRS primer outlines what you need to know about the process.
In virtually every state that collects them, you can pay state income taxes with a credit card as well. Check this nifty Mastercard cheat sheet for details about individual and business payment portals for state income taxes.
Pro Tip: Perhaps it goes without saying, but I’ll say it anyway: Paying your taxes and paying your tax preparation fees are two different things. Tax payments go to the IRS or state tax collectors through a payment processing intermediary. Tax preparation fees go to the accountant or software developer you retain to prepare your taxes. Since taxpayers frequently make these distinct payments simultaneously, it’s understandable when novices get them confused.
Taxpayers willing to file paper returns and forms can choose from three IRS-approved payment processing vendors:
Note that paper vouchers aren’t required for quarterly estimated tax payments made by credit card. All three vendors accept Visa, Mastercard, and American Express credit cards, plus popular mobile wallet providers.
Taxpayers who prefer to e-file their returns can chose from four IRS-approved processors for end-of-year payments, extension payments, and other types of tax payments accompanied by IRS forms:
Check the IRS Frequency Limit Table by Type of Tax Payment for more information on when and how often you can make various types of tax payments.
You’ll want to note these items before scheduling a credit card tax payment:
When it comes to covering your tax liabilities, some credit cards are better than others. Here’s a quick look at the top credit cards to pay your end-of-year and quarterly estimated taxes by category.
The most taxpayer-friendly cash back credit cards have outsize sign-up bonuses and offer relatively high ongoing returns on spending:
Check out our guide to the best cash back credit cards for more ideas.
Like their cash back counterparts, the best travel credit cards for tax payments have big sign-up bonuses and generous ongoing rewards programs:
Check out our guide to the best travel rewards credit cards for more ideas.
Low APR credit cards aren’t known for attractive rewards programs or luxurious value-added perks. They stand out with long 0% APR introductory promotions and regular APRs low enough to make short- and medium-term financing bearable:
Check out our guide to the best low APR interest credit cards for more ideas.
These taxpayer-friendly small business credit cards have fantastic sign-up bonuses or introductory APR promotions and attractive ongoing rewards:
Check out our guide to the best small business credit cards for more ideas. If you need help determining the most advantageous legal structure for your business, review our guide to choosing the right legal business entity.
If you don’t expect to have a major year-end or quarterly estimated tax liability this year, don’t worry. There are plenty of other ways to earn your new credit card’s sign-up bonus offer: making major travel or home improvement purchases in advance, for instance.
Just remember that credit card use is a privilege, not a right. Don’t put yourself in an uncomfortable – and avoidable – financial pickle just to earn a few extra cash back dollars or summit the final hill in your sign-up bonus climb. You could find yourself stuck with the consequences for years to come.
Have you ever paid your tax bill with a credit card?
Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Brian Martucci writes about frugal living, entrepreneurship, and innovative ideas. When he’s not interviewing small business owners or investigating time- and money-saving strategies for Money Crashers readers, he’s probably out exploring a new trail or sampling a novel cuisine. Find him on Twitter @Brian_Martucci.
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Should You Pay Taxes With a Credit Card?
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