Paying Taxes By Card – Which Service Offers the Best Fees?

It’s tax day. Many people will get refunds when they file their taxes, but not everyone. If you have to pay the IRS money, you must submit your payment by April 15th to avoid potential penalties and fees for a late payment. 

If you pay the IRS by writing a check or transferring money from your bank account, you typically don’t incur any additional charges. However, if you want to pay your taxes with a credit card, you are going to get hit with some added costs. That’s because the IRS won’t directly charge your credit card.  You can use your card to send Uncle Sam the money you owe, but you have to use a service to do it.

So, which service charges the most affordable fees to pay your income tax bill? One taxpayer has taken to Reddit to ask this question, and here’s the answer. 

What’s the cheapest way to pay taxes with a credit card?

The IRS provides information on which integrated IRS e-file and e-pay service providers you can use to pay your taxes with a credit card. According to the IRS, here are the fees charged when you use an online tax preparation service and pay with your credit card directly through that service :

It’s important to note that if you do pay directly through one of these services, you may end up paying a higher fee than if you simply used a third-party payment processor and made the payment on your own. For example, the IRS data shows that if you just use Pay1040, you pay 1.75% if you are paying by credit card as long as you aren’t using an American Express or a commercial credit card, while ACI Payments, Inc. charges 1.85% with a $2.10 minimum. 

If you want to use TurboTax to file your taxes for you, but would rather pay the IRS directly with a payment processor that charges less, you can. When you file your return with TurboTax, you’ll just need to select the option to pay by check. Even though you are indicating with this option that you’ll be sending a check, you can still go to the payment processor directly, input your information, and pay what’s due. This can help you save on paying your taxes using a card.

Should you pay your taxes using a credit card?

As you can see, every option to pay your taxes by credit card charges a fee. And, in most cases, the fee is going to be higher than any rewards you would earn on the card — although there are some exceptions, such as if you choose one of the more affordable independent services and you have a card offering 2% back or more.

Because of this fee, you should usually avoid paying taxes using a card unless you are sure you can cover the fees or unless you have a very good reason to charge your taxes. For example, if you can cover the fee with your rewards and you’re trying to earn a new cardmember bonus, paying your taxes on the card could help you hit the required spending minimum to earn the bonus.  Or, if you don’t have enough money to pay your tax bill in full, you could use a 0% APR card to provide you with a longer time to pay the bill. 

Before charging your taxes, though, you should always make sure you can cover the cost before you start accruing interest, as credit card interest is very high, and you don’t want to end up making your taxes even more expensive to pay. 

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