Pay taxes via credit card, 2019 edition

Preparing taxes is no fun. No fun at all. But paying taxes doesn’t have to be painful. In fact, it can be quite rewarding to pay taxes via credit card. The key is to earn credit card rewards that more than offset tax payment fees. Here’s what you need to know…

pay federal taxes with a credit card

Important due dates for 2019 taxes

  • January 15 2019: 4th quarter estimated taxes for 2018
  • April 15 2019: Final 2018 taxes due
  • April 15 2019: 1st quarter estimated taxes for 2019
  • June 17 2019: 2nd quarter estimated taxes for 2019
  • September 16 2019: 3rd quarter estimated taxes for 2019
  • January 15 2020: 4th quarter estimated taxes for 2019

Pay taxes via credit card: Background

Here is some key information you’ll need to know about paying taxes with credit or debit cards:

Credit card fee 1.87% to 1.99%: The IRS maintains a list of companies that accept credit and debit cards towards tax payments. You can find the current information by clicking here. Currently there are three separate payment processing companies on the list. At the time of this writing, debit card fees range from $2 to $2.59 per transaction and credit card fees range from 1.87% to 1.99%. Alternatively, you can pay taxes via the Plastiq Bill Pay service, but that will cost you more: 2.5%.

Two payment limit (per processor): The IRS maintains a table of frequency limits for paying taxes via credit or debit card (found here). In general, they say you can make up to two payments per tax period per type of tax payment. For example, you can make 2 payments every quarter to your quarterly estimated taxes, and you can make 2 payments every year to your annual taxes. Important: In my experience, these limits are enforced per payment processing company. That means that you can really make up to 6 payments per tax period per type of tax payment (or more if you make Plastiq bill payments as well). An IRS advisor I spoke with several years ago did not think that there would be any problem with making more than 2 payments by using different processors. Since then, I have made more than 2 payments per tax period many times and never had any issues. That is, of course, just my own personal experience. I can’t guarantee that your outcome would be the same.

No cash advance fees: I’m often asked whether credit card companies charge cash advance fees when paying taxes by credit card. The answer is no. All three payment processors agree (via their FAQ pages) that the payment is treated as a purchase not a cash advance. You can find FAQ info here, here, and here.  Plastiq: There is a chance of being charged a cash advance fee if you use a Visa card with the Plastiq bill pay service, but Plastiq will warn you about this before you submit the payment.

Unlimited payments via Plastiq: If you’re willing to incur slightly higher fees, you can make an unlimited number of tax payments via the Plastiq bill pay service. Plastiq usually charges 2.5% to pay bills (including taxes) via credit card, but they occasionally offer lower fees via short term promotions. For details, please see: Plastiq Bill Payment Service.

To pay taxes via Plastiq, use Plastiq’s tax payment screen: plastiq.com/us-taxes.

Fees no longer deductible: Tax preparation fees used to be deductible when itemizing deductions for personal tax returns, but that is no longer the case with the latest tax bill in effect.  That said, businesses can treat processing fees as legitimate business expenses which will, in turn, reduce the tax burden to the extent that these charges reduce overall profits.

View tax payment history: Once you’ve made payments through online processors, you may want to see proof that the IRS received the amount you sent. You can view past payments by signing up here: irs.gov/payments/view-your-tax-account.

Reporting estimated payments: Estimated payments should be reported when filing your annual taxes on line 65 of Form 1040 or line 41 of Form 1040A. In my experience, if you make a mistake and forget to report some of these payments, the IRS will catch the error and refund the difference.

Paying end of year taxes: Tell your tax preparer or tax software that you’ll pay via check. Then, browse to the appropriate tax payment site (e.g. Pay1040.com, OfficialPayments.com, or PayUSAtax.com) to pay your taxes. There is no need to mail in the 1040V payment voucher.

Samsung Pay & Google Pay

Some tax payment websites support mobile wallet payments such as Samsung Pay or Google Pay.  The US Bank Altitude Reserve card earns 3X for mobile wallet payments, so it should be a great match. However, readers have reported that Samsung / Android Pay (Google Pay) are only supported through Visa Checkout and that this does not trigger the Altitude’s 3X rewards.

Amex Express Checkout

Since Amex is strict about not counting manufactured spending towards new credit card welcome bonuses, tax payments are a great alternative.  The nice thing about Amex Express Checkout is that you can use it to make payments even if you don’t have your card.  If you recently signed up for a new Amex card and added it to your online account but haven’t yet received the physical card, you should still be able to pay through Amex Express Checkout.

Top 5 reasons to pay federal taxes with a credit card or gift card

1. Profit

A number of credit cards earn cash rewards greater than 1.87%. The best of the best are two cards that earn 3% cash back in your first year of card membership:

Since you’ll earn 3% cash back on both the base tax payment and the processing fees with the above cards, your profit should be approximately 1.186% of your tax payment.

Example:

  • $10,000 tax payment + 1.87% fee = $10,187
  • Cash back earned at 3% = $305.61
  • Profit = $305.61 – $187 = $118.61 (1.186% of $10K)

For more examples of cards that earn better than 2% rewards, see: Best Rewards for Everyday Spend.

2. Meet minimum spend requirements

If you recently signed up for new credit cards, chances are good that you have to spend thousands of dollars in order to earn the associated signup bonuses. Paying taxes is a cheap and easy way to accomplish that.

3. Buy miles cheaply

Several credit cards offer up to 1.5 miles per dollar for spend. In these cases, a 1.87% tax payment fee means that you can essentially buy miles for 1.22 cents per dollar. Even better, the Amex Blue Business Plus credit card earns 2 Membership Rewards points per dollar. In this case you can essentially buy miles for 0.92 cents per dollar.

2X Example:

  • $10,000 tax payment + 1.87% fee = $10,187
  • Miles earned at 2X = 20,374
  • Cost per mile = $187 / 20,374 = 0.92 cents per mile

1.5X Example:

  • $10,000 tax payment + 1.87% fee = $10,187
  • Miles earned at 1.5X = 15,281
  • Cost per mile = $187 / 15,281 = 1.22 cents per mile

Cards that offer 2X airline miles per dollar:

Cards that offer 1.5X airline miles per dollar:

  • Chase Ultimate Rewards.  Two no-fee cards in Chase’s lineup earn 1.5 Ultimate Rewards points per dollar for all spend. Pair either one with a premium card (e.g. Sapphire Reserve, Sapphire Preferred, Ink Business Preferred, etc.) to transfer points to several airline or hotel programs:
    Chase Freedom Unlimited
    20K points
    20K after $500 spend in 3 months

    $0 Annual Fee

    FM Mini Review: Great to earn 1.5X Ultimate Rewards in categories with no bonuses. Excellent companion card to Sapphire Reserve or Sapphire Preferred!


    Card Type: Visa Signature or Platinum

    Base

    Earning rate: 1.5X on all purchases.

    Note: This card is known to be subject to Chase's 5/24 rule.

    See also: Transferable points programs

    Chase Ink Business Unlimited
    50K points
    50K after $3K spend in 3 months

    $0 Annual Fee

    FM Mini Review: Great to earn 1.5X Ultimate Rewards in categories with no bonuses. Excellent companion card to Ink Business Preferred, Sapphire Reserve or Sapphire Preferred!


    Card Type: Visa Signature Business

    Base

    Earning rate: 1.5X on all purchases.

    Note: This card is known to be subject to Chase's 5/24 rule.

    See also: Transferable points programs

  • Amex Membership Rewards.  Amex offers two cards that are capable of earning up to 1.5X.  In either case, points can be transferred to a large selection of airline programs or to a few hotel programs.
    The Business Platinum® Card from American Express
    75K points
    Up to 75K: 50K after $10K spend + 25K after additional $10K spend in 3 months.

    $450 Annual Fee

    Recent better offer: 150K after $20K Spend (Targeted)

    FM Mini Review: This card is absolutely loaded with high end perks. Depending upon your situation, those perks may be worth the annual fee or much more.


    Card Type: Amex Charge Card

    Base
    Travel
    Other

    Earning rate: 5X flights and prepaid hotels at AmexTravel.com ⚬ 1.5X points per dollar on eligible purchases of $5000 or more (up to 1 million additional Membership Rewards points per year) ⚬ 1X elsewhere

    Noteworthy perks: ⚬ Up to $200 a year in statement credits for airline incidental fees ⚬ -$100 Global Entry fee reimbursement.⚬ Airport lounge benefits ⚬ Rental car elite status ⚬ SPG Gold status ⚬ Hilton Gold status ⚬ Free Boingo wifi ⚬ 10 complimentary single flight segment passes for Gogo inflight internet each calendar year. Terms Apply. See Rates & Fees

    See also: Maximizing value from Amex Platinum Cards

    The Amex EveryDay® Preferred Credit Card from American Express
    20K points
    20K after $1K spend in 3 months

    $95 Annual Fee

    FM Mini Review: Thanks to the 50% bonus on points earned, this is, in my opinion, one of the strongest mile-earning cards available.


    Card Type: Amex Credit Card

    Base
    Gas
    Grocery

    Earning rate: ⚬ 3x points at US supermarkets on up to $6,000 per year in purchases (then 1x) ⚬ 2x points at US gas stations ⚬ 1x points on other purchases.

    Noteworthy perks: Earn 50% more points: Use your Card 30 or more times on purchases in a billing period and get 50% more points on those purchases less returns and credits. Terms apply. See Rates & Fees

  • Capital One Miles. Capital One offers two cards that earn 2X rewards miles everywhere.  These “miles” can be transferred to real airline miles at a rate of 2 to 1.5.  This makes the following cards capable of earning 1.5X airline miles everywhere:
    Capital One® Venture® Rewards Credit Card
    50K "miles"
    50K after $3K spend in 3 months from account opening

    No Annual Fee First Year, Then $95

    FM Mini Review: This card earns 2 "miles" per dollar, which are worth exactly 1 cent each toward travel. This makes the return on spend similar to a 2% cash back card (though in this case you must redeem your miles to offset travel in order to get 1 cent per mile). One big advantage over cash back: Capital One allows transfering their "miles" to airline miles at a 2 to 1.5 ratio.


    Card Type: Visa Signature

    Base

    Earning rate: 2X everywhere

    Noteworthy perks: ⚬ Earn 10x miles on hotels when you pay with your Venture card at hotels.com/venture ⚬ Redeem miles for travel at value of 1 cent per mile. ⚬ Receive up to $100 application fee credit for Global Entry or TSA Pre✓®

    Capital One® Spark® Miles for Business
    Up to 200K miles
    Up to 200K miles: 50K after $5K spend in 3 months from account opening. Earn an additional 150K miles when you spend $50K on total purchases within the first 6 months. Limited time offer.

    No Annual Fee First Year, Then $95

    Recent better offer: None.

    FM Mini Review: This card is basically the same as the Spark Cash for Business, but rewards are intended to be used to offset travel purchases. One big advantage over cash back: Capital One allows transfering their "miles" to airline miles at a 2 to 1.5 ratio.


    Card Type: Visa Signature

    Base

    Earning rate: 2X everywhere

    Noteworthy perks: Redeem miles for travel at value of 1 cent per mile.

  • Airline miles.  A few airline branded cards offer 1.5 miles per dollar for all spend:
    Virgin Atlantic World Elite Mastercard
    75K miles
    20K after first purchase + 50K after $12K in 6 months + 5K for adding 2 authorized users

    $90 Annual Fee


    Card Type: Mastercard World Elite

    Base
    1.5X
    (2.1%)

    Earning rate: 1.5X everywhere

    Big spend bonus: 7,500 bonus points with $15K cardmember year spend + an additional 7,500 points with $25K cardmember year spend; Also: 25 tier point towards elite status per $2,500 spend (max 50 tier points per month).

    See also: An analysis of the Virgin Atlantic 90K offer

    Air France KLM World Elite Mastercard
    25K miles
    25K after $1K in the first 3 months

    $89 Annual Fee


    Card Type: Mastercard World Elite

    Base
    1.5X
    (2.1%)
    Brand

    Earning rate: 3X on Air France, KLM, and SkyTeam purchases ⚬ 1.5X everywhere else

    Big spend bonus: 5K after anniversary when you spend $50 or more the previous year ⚬ 40XP points towards status after anniversaru when you spend $15K or more the previous year

    Chase United MileagePlus® Club Card
    50K miles
    50K after $3K spend in 3 months

    $450 Annual Fee

    Recent better offer: It is common to receive a targeted offer with the first year fee waived

    FM Mini Review: While pricey, the Chase United MileagePlus® Club Card is a great choice for those who want a United club membership and waived close-in award fees.


    Card Type: Visa Signature

    Base
    1.5X
    (2.1%)
    Brand

    Earning rate: ⚬ 2X United ⚬ 1.5X everywhere else

    Noteworthy perks: ⚬ United Club membership ⚬ No fees on close-in awards ⚬ Priority check-in, security screening, baggage handling, and boarding ⚬ Free 1st and 2nd checked bags ⚬ Hertz President's Circle Elite Status ⚬ Hyatt Discoverist elite status ⚬ Primary auto rental collision damage waiver

    Note: You may be targeted for a 75K offer on this card. Details here.. This card is known to be subject to Chase's 5/24 rule.

4. Earn valuable big spend bonuses: elite status, free nights, companion pass, etc.

Many credit cards offer bonuses for meeting high spend thresholds. You can find a comprehensive list here: Best big spend bonuses. Here are a few examples:

  • Amex Delta Reserve or Delta Reserve Business: Spend $30,000, get 15,000 bonus miles plus 15,000 Medallion Qualifying Miles (towards elite status). At $60,000 spend, get another 15,000 bonus miles and 15,000 Medallion Qualifying Miles.
  • Amex Delta Platinum or Delta Platinum Business: Spend $25,000, get 10,000 bonus miles plus 10,000 Medallion Qualifying Miles (towards elite status). At $50,000 spend, get another 10,000 bonus miles and 10,000 Medallion Qualifying Miles.
  • Southwest Plus, Southwest Premier, or Southwest Business: With Southwest, when you earn 110,000 points in a calendar year (including points earned from credit card spend) you get a companion pass good for an unlimited number of flights for the rest of that year and all of the next calendar year.
  • Barclaycard JetBlue Plus, or JetBlue Business: Spend $50,000 and get Mosaic status which offers free changes and cancellations; free checked bags; expedited security; early boarding; free drinks; enhanced point earnings; and 15,000 bonus points upon qualifying.

5. Liquidate Visa/MasterCard gift cards cheaply

Visa and MasterCard gift cards are debit cards. As such, they qualify for low flat fees for debit tax payments: $2.25, $2.59, or $2.65 (depending upon the tax processor you use). In other words, your cost to liquidate $500 gift cards will be approximately half a percent (0.5% to 0.54%). That’s pretty cheap.

If you use $500 Visa/MasterCard gift cards, then you can pay the following amounts:

  • PayUSAtax.com ($2.58 fee): Make a $497.42 payment.
  • Pay1040.com ($2.59 fee): Make a $497.41 payment.
  • OfficialPayments.com ($2 fee): Make a $498 payment.

The biggest problem with this is the IRS imposed 2 payments per processor limit. Online, this means that you can liquidate no more than 6 gift cards per type of tax payment. Via phone, though, you may find a tax processor willing to accept multiple debit cards for a single overall payment. Specifically, OfficialPayments is known to accept multiple gift cards via phone. When you make multiple payments over the phone, you do pay the $2.25 fee for each gift card. Unfortunately, OfficialPayments no longer works with Visa gift cards. Some Mastercard gift cards work, though (see below)

Which gift cards work?

  • Vanilla Visa gift card via Official Payments online
  • Visa gift card issued by Metabank via PayUSAtax online
  • Visa gift card issued by Metabank via Pay1040 online
  • Mastercard gift cards from Giftcards.com work with all three processors

Which gift cards don’t work?

  • Visa gift cards previously didn’t work with OfficialPayments, but that may have changed in 2019
  • Some Mastercard gift cards via OfficialPayments process as credit cards rather than debit cards (one known example are the US Bank Mastercards typically bought at grocery stores).

See also: Best options for buying Visa and MasterCard gift cards.

Last updated on January 15th, 2019

About Greg The Frequent Miler

Greg is the owner, founder, and primary author of the Frequent Miler. He earns millions of points and miles each year, mostly without flying, and dedicates this blog to teaching others how to do the same.

More articles by Greg The Frequent Miler »

21
Leave a Reply

avatar
9 Comment threads
12 Thread replies
13 Followers
 
Most reacted comment
Hottest comment thread
13 Comment authors
Kenneth BushGreg The Frequent MilerJames vanPiles of MilesKim Recent comment authors

This site uses Akismet to reduce spam. Learn how your comment data is processed.

  Subscribe  
Notify of
Eugene
Guest
Eugene

I have a Vanilla VGC, it says it’s issued by Bancorp AND Metabank. Do you know if the Vanilla VGCs are accepted for federal tax payments? Thank you

Charles
Guest
Charles

PayUSA and Pay1040 -> Yes.
Official Payments -> No. But it has been a while since I have tried.
OP has allowed more than 2 payments per quarter in the past but not any longer.

Mary Jane
Guest
Mary Jane

Hi Greg, as usual, great article. Can you pay state property taxes, this way, as well?

CaveDweller
Guest
CaveDweller

In Illinois Yes BUT check on ur local stuff and Learn how to do Before u Do it ..CHEERs

tro
Guest
tro

” If you recently signed up for a new Amex card and added it to your online account but haven’t yet received the physical card”

How do you do this? I tried with the card info I was given on instant approval, but it didn’t work, said not recognized or similar. I assumed because the 4 digit CCV was listed as temporary, I needed to wait. Or was my issue maybe that I was trying to add my first business card to a login with personal accounts?

Ish
Guest
Ish

Maybe a naive question, but if my taxes have already been deducted from my paycheck (and therefore I don’t owe any taxes), can I still make payments using credit card and get a refund of the extra tax payments made using credit card? Any article/link you could point me to where I can read more about this would be helpful too. Thanks.

5150d
Guest
5150d

Excellent and detailed Greg! This is the ONLY method I use for MSR. It’s legit and works. Do it at the end of the calendar year and it’s refunded back in a couple of months when you file taxes. Or, just reduce your fed tax withholding through your employer and make these estimated payments during the year.

Mark
Guest
Mark

The Hilton Honors Ascend card gets a free weekend night for $15,000 spend on the card. A $15,000 tax payment @ 1.87% costs $280. So, $280 for a free weekend night at any Hilton.

Kim
Guest
Kim

I tried VGC from VanilaGiftcom(I bought it at CVS) at OfficialPayments.com today and it worked.

Piles of Miles
Guest
Piles of Miles

Kim is correct, seeing her comment I just used a 500 VGC Vanilla from Walgreens on OfficialPayments (OP). That is a viable option now for visa (at least the vanilla type) using OP from the options. If vanilla works, I would think other types of VGC could as well?

James van
Guest
James van

Just paid nys tax and Federal tax with amex business Platinun and spg because of the high $ amounts The IRS will accept $99,999.00 no more but you can make multiple payments with same credit card 15 times and no problem.

Kenneth Bush
Guest
Kenneth Bush

The 1040A (and the 1040EZ) no longer are used for filing taxes. Everything is on the revised 1040 with appropriate schedules.

As for deductions, the standard deduction for all filing statuses nearly doubled (along with the elimination of the personal exemptions). In order to make itemizing deductions viable for 2018, a single filer would need at lease $12,000 of deductible items, compared to $6,350 in 2017. Fewer people will find itemizing deductions to be of value for 2018 federal income taxes.