When you pay your taxes, you have several payment methods to choose from. The Internal Revenue Service (IRS) allows direct debit from your bank for free. You can mail a check, transfer the money via wire, or pay in cash at a local IRS retail partner.
For the most part, you can also pay your taxes with a credit or debit card. You can also pay many of the fees associated with paying taxes, such as the minimum health insurance coverage penalty. Every major credit card is accepted as well as credit cards attached to digital wallets like PayPal and Google Pay.
Paying with a credit card is convenient, but it could cost you. The IRS uses third-party payment processors that tack on between 1.87% and 1.99% in fees. (Debit card processing fees are a flat charge of between $2.00 and $3.95.) These fees are not tax-deductible, and they cancel out even the most generous credit card rewards points.
But paying taxes by credit card can also save you money. If you don’t have the cash on Tax Day but know you’ll have it before your credit card payment is due, then paying by credit card will help you avoid costly late-payment fees and even interest on your unpaid tax liability.
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 — not all types of tax returns are, depending on the form you filed — you can make payments by credit card before you file, after your return is accepted, or if you receive a past-due notice.
Credit card payments on or before Tax Day
Tax Day in 2021 is May 17. Taxpayers who haven’t filed their return or paid their tax liability by that date could be subject to expensive late-filing or late-payment fees unless they file for a tax extension.
(Read more about what happens if you file your taxes late.)
You can select a method of payment when you file your tax return, whether you file electronically or by mail, or if you are paying off a tax bill you received. Credit cards and debit cards can be used in all those instances, provided you’re filing one of the eligible forms. International people who owe U.S. taxes can also pay by credit card.
To make a credit card payment, you can access one of the credit card payment processors from the IRS website or via its smartphone app, IRS2Go.
If you filed an extension, then your tax return and payment for any tax liability is due on October 15th. (You’ll still need to file the extension by May 17 to qualify.) As with taxpayers who paid before Tax Day, taxpayers who filed an extension can still pay by credit card using any of the same means.
Making partial payments
The IRS lets you establish a payment plan if you’re unable to pay your taxes all at once. Such partial tax payments can be made with a credit card only if you owe less than $25,000, in which case you’d have to pay by direct debit.
The IRS’s payment plans cost extra. Not only will you sometimes have to pay a setup fee; you’ll also have to pay interest and penalties on the remaining balance each month. That’s in addition to the payment-processing fees you have to pay if using a credit or debit card.
The individual payment plan setup fees are as follows:
Short-term payment plan (120 days or fewer): $0
Long-term payment plan (120 days or more): $31 if you using automatic debit from your bank account; $149 if paying in installments electronically, including using credit cards
For low-income taxpayers, the setup fee may be waived.
Paying a past-due tax bill with a credit card
If you receive a notice from the IRS that you have a past-due tax liability, then you can make the payment using a credit card or any other type of eligible payment service just like paying normally.
Make sure you contact the IRS to confirm the legitimacy of the notice, as financial predators frequently target taxpayers with false warning letters.
Making estimated tax payments with a credit card
If you’re self-employed or work as an independent contractor, then you need to manually pay estimated taxes periodically throughout the tax year. Employees of an organization or business already pay estimated taxes by automatically withholding them from their paycheck.
In both cases, if you overestimated your tax payments, then you’re eligible for a refund of the difference. (That’s what a refund is; not a reward from the government for being a good citizen.) But if you find that you owe taxes when filing your return, it’s because you _under_estimated your payments throughout the year.
If you don’t automatically withhold estimated taxes from your paycheck, then you can pay them using any of the payment options open to taxpayers, including credit cards.
Paying a federal tax lien
If you don’t pay your taxes, eventually the IRS will place a tax lien on your financial assets in an effort to recoup the money you owe. A tax lien can garnish earnings from selling your real estate property and business assets as well as affect your ability to get credit. If a lien is not paid, then these assets can be seized outright.
Tax liens can be paid with a credit card or debit card in addition to the IRS’s other payment options. However, the tax lien will not be immediately removed upon payment; you’ll have to file a certificate of release form.
Which types of tax returns can I pay with a credit card?
The IRS doesn’t let you pay every type of federal tax with a credit card or debit card. You can only use a credit card to pay taxes (and penalties) owed after filing certain types of returns. Additionally, you can only make debit and credit card payments a limited number of times per term.
The following table presents the eligible tax return forms for which a credit card, debit card, or in-person cash payment can be used to pay an associated tax liability. If you don’t see your tax form on this list, then you need to pay using another option, such as direct bank payment or check.
Taxpayer Type | Tax Form or Penalty | Payment Limit |
|---|---|---|
Individual | Form 1040, Individual Tax Return | Two per year |
Individual | Form 1040, Individual Tax Return Installment Agreement | Two per month |
Individual | Form 1040-ES, Estimated Tax for Individuals | Two per quarter |
Individual | Form 1040X, Amended Individual Income Tax Return | Two per year |
Individual | Health care penalty, Form 1040 and Form 1040X | Two per year |
Individual | Form 4868, Application for Automatic Extension | Two per year |
Individual | Form 5329, Additional Taxes on Qualified Plans | Two per year |
Individual | Trust Fund Recovery Penalty | Two per month |
Business | Form 940, Employer's Federal Unemployment Tax Return | Two per year |
Business | Form 940, Employer's Federal Unemployment Tax Return, Installment Agreement | Two per month |
Business | Form 941, Employer's Quarterly Federal Tax Return | Two per quarter |
Business | Form 941, Employer's Quarterly Federal Tax Return, Installment Agreement | Two per month |
Business | Form 943, Employer's Tax Return for Agricultural Employees | Two per year |
Business | Form 943, Employer's Tax Return for Agricultural Employees, Installment Agreement | Two per month |
Business | Form 944, Employer's Annual Federal Tax Return | Two per year |
Business | Form 945, Annual Return of Withheld Federal Income Tax | Two per year |
Business | Form 945, Annual Return of Withheld Federal Income Tax, Installment Agreement | Two per month |
Business | Form 1041, U.S. Income Tax Return for Estates and Trusts | Two per year |
Business | Form 1065, U.S. Return of Partnership Income | Two per year |
Business | Form 2290, Heavy Highway Vehicle Use Tax Return | Two per year |
Paying your state taxes with a credit card
In addition to federal taxes, most people have to pay state and local taxes separate from their federal tax return. You can pay your state taxes using a credit card in every state except Alaska and Nevada. As with paying federal taxes, you will be assessed a “convenience fee” from the credit card payment-processing company contracted by your state.
Many people also owe local taxes to their county, such as property taxes. While some counties accept credit card payments for local taxes, not all do. Additionally, you may be able to pay taxes with a credit card in some counties in the two states that don’t let you pay state taxes by credit card. Check with your county’s website or call its department of revenue to confirm.