Pay taxes via credit card 2020 edition

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You might not like paying taxes, but when you pay taxes via credit card can be quite rewarding. The key is to earn credit card rewards that more than offset tax payment fees. For example, if you’ve signed up recently for a card that requires large spend to get a big welcome bonus, paying taxes via credit card can be the solution.

Here’s everything you need to know…

Pay taxes via credit card

What’s new?

  • October 15 2020:  Chase Freedom and Freedom Flex cards are offering 5X this quarter (Oct – Dec) for Paypal spend.  PayUSATax accepts Paypal, so it should be possible to get 5% back for paying taxes, up to the Freedom $1500 limit.
  • Sep 9 2020: Clarified section regarding sending extra payments when filing jointly.
  • July 13 2020:  Discover It is offering 5% back this quarter (July – September) for Paypal spend.  PayUSATax accepts Paypal, so it should be possible to get 5% back for paying taxes, up to the Discover It $1500 limit.
  • June 27 2020: Visa gift cards weren’t working at Official Payments for a while, but as of June 27, 2020 (if not earlier), Visa gift cards have been working again.
  • July 1: Plastiq bill payment fees increase to 2.85%

Important due dates

  • January 15 2020: 4th quarter estimated taxes for 2019
  • July 15 2020:
    • Final 2019 taxes due (usually April 15)
    • 1st quarter 2020 estimated taxes (usually April 15)
    • 2nd quarter 2020 estimated taxes (usually June 15).
  • September 15: 3rd quarter 2020 estimated taxes
  • January 15 2021: 4th quarter 2020 estimated taxes

Pay taxes via credit card: Key Info

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

Credit card fee 1.87% to 1.99% (or 2.85%)

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 $3.95 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: 2.85% (as of July 1 2020).

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.

Twice as many potential payments when filing jointly

If you file jointly with a partner, you can make payments in each person’s name, separately.  These payments will still apply to the one overall tax return, but not always automatically.  According to reader reports, in some cases the IRS matches these payments to the combined return automatically.  In other cases, people have reported the need to call the IRS to ask them to combine the payments.  I recommend calling shortly after filing your annual taxes to ensure that the IRS has correctly applied both sets of payments to the same return.

Obviously if you are filing separately, you can each make your own payments without any issues.

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 official IRS 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.

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 2.85% 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.

Are tax payment fees deductible?

Fees are no longer deductible for personal taxes: Tax preparation fees used to be deductible when itemizing deductions for personal tax returns, but that is no longer the case.

Card processing fees are tax deductible for business taxes: This can substantially reduce your net cost of using payment services.

Tax payment history (how to see your info online)

Once you’ve made payments through online processors, Plastiq, or other means, 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. 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.

How to pay 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, PayUSAtax.com, or Plastiq.com/us-taxes) to pay your taxes. There is no need to mail in the 1040V payment voucher.

What happens if you over-pay your taxes?

Overpayments will be refunded: The IRS will refund any overpayment unless you owe a debt on your account.

Do you need to mail in payment vouchers?

No. No payment voucher required. You don’t need to send in a voucher if you pay by card.

Paypal

PayUSATax allows payments via PayPal.  Sometimes cards like the Discover It, Discover It Student, and Chase Freedom offer 5% rewards for Paypal purchases (up to $1500 combined spend per quarter).  Tax payments during these times should count!

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 Pay and 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%. One great option is to 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.

Below are some of the most valuable current welcome bonuses for consumer cards.  If you’re interested in business cards, please click here to see the best business card offers.

Click on a card for details; Press “Next” to see more offers:

Card Offer
Marriott Bonvoy Boundless™ Credit Card
5 Free Nights
Earn 5 50K free night certificates after $5K spend in 3 months
(Offer Expires 10/28/2020)

$95 Annual Fee

Chase Sapphire Preferred Card
80K Points
80K after $4K spend in the first 3 months

$95 Annual Fee

This card is subject to Chase's 5/24 rule (click here for details). This card is not available to either (i) current cardmembers of any Sapphire credit card, or (ii) previous cardmembers of any Sapphire credit card who received a new cardmember bonus within the last 48 months.

Recent better offer: None. This is the best offer we've seen.

Chase IHG® Rewards Club Premier Credit Card
140K Points
140K after $3K in the first 3 months

No Annual Fee First Year, Then $89

Chase Freedom Unlimited
20K points + 5X grocery + 15 months 0% APR
Earn 20,000 points (worth $200 cash back) after spending $500 in the first 3 months + 5x Ultimate Rewards points (worth 5% cash back) on grocery purchases for 1st year (on up to $12K in purchases, excludes Target & Walmart). 0% Intro APR for 15 months from account opening on purchases, then a variable APR of 14.99 - 23.74%.

No Annual Fee

This card is subject to Chase's 5/24 rule (click here for details). Even though this card is marketed as a cash back card, it actually earns Ultimate Rewards points which are redeemable for 1 cent each, or can be combined with other Ultimate Rewards-earning cards to get even more value. This product is available to you if you do not have this card and have not received a new cardmember bonus for this card in the past 24 months.

Recent better offer: None. This is the best offer we've seen.

Chase Freedom Flex
20K points + 5X grocery + 15 months 0% APR
Earn 20,000 points (worth $200 cash back) after $500 spend in 3 months + 5x Ultimate Rewards points (worth 5% cash back) on grocery purchases for 1st year (on up to $12K in purchases, excludes Target & Walmart). 0% Intro APR for 15 months from account opening on purchases, then a variable APR of 14.99 - 23.74%.

No Annual Fee

This card is subject to Chase's 5/24 rule (click here for details). Even though this card is marketed as a cash back card, it actually earns Ultimate Rewards points which are redeemable for 1 cent each, or can be combined with other Ultimate Rewards-earning cards to get even more value. This product is available to you if you do not have this card and have not received a new cardmember bonus for this card in the past 24 months.

UBS Visa Infinite
Up to 100K points (call to apply)
50K after $10K spend in 3 months + 50K after paying 2nd year annual fee

No Annual Fee First Year, Then $495

Hilton Honors American Express Aspire Card
150K Points
150K after $4K spend in 3 months. Terms apply. (Rates & Fees)

$450 Annual Fee

Capital One Venture Rewards Credit Card
100K "Miles"
Earn 100K bonus miles when you spend $20K on purchases in the first 12 months from account opening, or still earn 50K miles if you spend $3K on purchases in the first 3 months

$95 Annual Fee

Recent better offer: None. This is the best we've seen in recent years.

The Platinum Card® from American Express
60K points + up to $300 in statement credits
60K after $5K spend in 3 months plus 20% back as a statement credit for restaurant purchases worldwide for the first 12 months up to $300 back. Terms apply.

$550 Annual Fee

Citi Premier Card
60K points
60K after $4K spend in 3 months

$95 Annual Fee

Recent better offer: None

American Express® Gold Card
60K Points
60K after $4K spend in first 6 months. Terms apply. (Rates & Fees)

$250 Annual Fee

Recent better offer: This is the best we've seen

AAdvantage Aviator Red World Elite MasterCard
60K miles
60k miles after 1st purchase within 90 days and payment of the $99 AF

$99 Annual Fee

Info about this card has been collected independently by Frequent Miler. The issuer did not provide the details, nor is it responsible for their accuracy.

Alternate offer: There is an in-flight offer for 60K after first purchase with the 1st year fee waived. See this link; code 999999 may work for the promo code.

Recent better offer: None. This is the best we've seen.

Delta SkyMiles® Gold Credit Card from American Express
50K miles
50K miles after $2K spend in the first 3 months. Terms apply. (Rates & Fees)
(Offer Expires 10/28/2020)

No Annual Fee First Year, Then $99

Chase Iberia Visa Signature® Card
Up to 100K bonus Avios
Get 50K Avios after $3K spend in first 3 months + 50K more Avios after $20K spend in first year

$95 Annual Fee

Chase British Airways Visa Signature® Card
Up to 100K bonus Avios
Get 50K Avios after $3K spend in first 3 months + 50K more Avios after $20K spend in first year

$95 Annual Fee

Chase Aer Lingus Visa Signature® Card
Up to 100K bonus Avios
Get 50K Avios after $3K spend in first 3 months + 50K more Avios after $20K spend in first year

$95 Annual Fee

American Express® Green Card
50K Points
50K points after $2K spend in 3 months. Terms apply. See

$150 Annual Fee

Info about this card has been collected independently by Frequent Miler. The issuer did not provide the details, nor is it responsible for their accuracy.

Alternate offer: Via certain browsers you may see an offer for 30K points plus up to $200 back for US grocery spend.

Recent better offer: This is the best we've seen

Chase World of Hyatt Credit Card
You choose: Up to 50K points OR One Cat 1-7 free night certificate + $200 statement credit
New cardmembers can choose between two bonus offers (each offer also comes with 10 elite night credits in 2020 and 10 elite night credits in 2021): OFFER 1: 50K points: 25,000 points after $3K spend in 3 months + 25,000 points after $6K total spend in 6 months. OFFER 2: $200 statement credit after first purchase + one Cat 1-7 free night certificate after $3K in purchases in the first 3 months

$95 Annual Fee

This card is subject to Chase's 5/24 rule.

Recent better offer: 60K: 40K after $3K in 3 months + 20K after $6K total in 6 months (Expired 1/9/19)

Wells Fargo Visa Signature Card
Up to 50K bonus points
5X rewards points on up to $12,500 in gas, grocery, and drugstore purchases for 6 months. (that's 1x normal earnings plus 4x bonus)

No Annual Fee

Alaska Airlines Visa Signature
40K + Companion Fare
40K + Companion Fare after $2K spend in 3 months

No Annual Fee First Year, Then $75

Delta SkyMiles® Platinum Credit Card from American Express
60K miles + 5K MQMs
60K miles + 5K MQMs after $3K spend in the first 3 months. Terms apply. (Rates & Fees)
(Offer Expires 10/28/2020)

$250 Annual Fee

Chase Southwest Airlines Rapid Rewards® Plus Card
40K Points
40K Points after $1K spend in the first 3 months

$69 Annual Fee

This card is subject to Chase's 5/24 rule (click here for details).

Recent better offer: Up to 75K points: 40K points after $1K spend in the first 3 months plus 35K after $5K spend in 6 months [Expired 2/10/20]

Chase Southwest Airlines Rapid Rewards Priority Credit Card
40K Points
40K Points after $1K spend in the first 3 months

$149 Annual Fee

Be sure to choose the card you want after clicking through the link. This card is known to be subject to Chase's 5/24 rule.

Recent better offer: Up to 75K points: 40K points after $1K spend in the first 3 months plus 35K after $5K spend in 6 months [Expired 2/10/20]

Marriott Bonvoy Brilliant™ American Express® Card
125K points + Platinum Status
125K points + Platinum Status: 100K points after $5K spend in the first 3 months + Platinum status for 2021 membership year (2/1/21 to 1-31-22) + 25K points after first anniversary. Terms apply.
(Offer Expires 1/13/2021)

$450 Annual Fee

Hilton Honors American Express Surpass Card
130K Points
130K after $2K in the first 3 months. Terms apply.(Rates & Fees)

$95 Annual Fee

Via some browsers you may find a targeted 140K offer with a refer-a-friend link. You can find our refer-a-friend link here (Note: this refer-a-friend link is not an affiliate link. Information about this link was collected independently by Frequent Miler)

Chase Sapphire Reserve Card
50K Points
50K after $4K spend in 3 months

$550 Annual Fee

This card is subject to Chase's 5/24 rule (click here for details). This card is not available to either (i) current cardmembers of any Sapphire credit card, or (ii) previous cardmembers of any Sapphire credit card who received a new cardmember bonus within the last 48 months.

Chase Southwest Airlines Rapid Rewards Premier Credit Card
40K Points
40K Points after $1K spend in the first 3 months

$99 Annual Fee

Be sure to choose the card you want after clicking through the link. This card is known to be subject to Chase's 5/24 rule.

Recent better offer: Up to 75K points: 40K points after $1K spend in the first 3 months plus 35K after $5K spend in 6 months [Expired 2/10/20]

Choice Privileges® Visa Signature® Card issued by Barclays
50K points
50K after $1K spend in 90 days

No Annual Fee

Info about this card has been collected independently by Frequent Miler. The issuer did not provide the details, nor is it responsible for their accuracy.

Recent better offer: 64K points: 32K after $1K spend in 90 days + 32K after an additional $2K spend within the first 180 days

Chase United Explorer Card
40K Miles
40K miles after $2K spend in first 3 months

$95 Annual Fee

This card is subject to Chase's 5/24 rule (click here for details).

Recent better offer: Expired 9/29/20: 60K miles after $3K spend

Hilton Honors American Express Card
80K Points
80K after $1K spend in 3 months. Terms apply. (Rates & Fees)

No Annual Fee

Via some browsers you may find a targeted 95K offer with a refer-a-friend link. You can find our refer-a-friend link here (Note: this refer-a-friend link is not an affiliate link. Information about this link was collected independently by Frequent Miler)

Alternate offer: You may see a better offer that includes a $100 statement credit during the booking process at Hilton.com.

Blue Cash Preferred® Card from American Express
$300 Back
Limited-time offer: $300 cash back as a statement credit after $3K in the first 6 months. Terms Apply. (Rates & Fees)
(Offer Expires 12/10/2020)

No Annual Fee First Year, Then $95

Recent better offer: Up to $350: 10% cash back on purchases at U.S. Restaurants in the first 6 months, up to $200 back. Plus, earn $150 back after $1K spend in 3 months. (Expired 5/3/17)

Korean Air SKYPASS Visa issued by US Bank
30K miles
30K miles after $3K spend in 90 days

$95 Annual Fee

Info about this card has been collected independently by Frequent Miler. The issuer did not provide the details, nor is it responsible for their accuracy.

Recent better offer: 40K after $2.5K spend targeted (last reported 2/26/2016)

30K: 15K after first purchase + 15K after $2k spend in 90 days

25K: 15K after first purchase, 10K after $2K spend in first 3 months (expired 1/18)

United Gateway Card
20K Miles + 3X Grocery
20K miles after $1K spend in first 3 months; Plus earn 3X at grocery stores, on up to $1,500 per month through 9/30/2021

No Annual Fee

The Hawaiian Airlines® World Elite MasterCard® issued by Barclays
50K miles
50K after $2K spend in 90 days

$99 Annual Fee

Info about this card has been collected independently by Frequent Miler. The issuer did not provide the details, nor is it responsible for their accuracy.

Alternate offer: You may be able to get 60K miles after 1st purchase via paper application distributed in-flight.

Recent better offer: 50K after $2K spend in 90 days + 25K after $6K total in first 12 months

Citi Rewards+ Card
15K points
15K points after $1K spend in 3 months

No Annual Fee

Capital One Venture One Credit Card
20K "miles"
One time bonus: 20K after $1K spend in 3 months from account opening

No Annual Fee

Capital One Quicksilver
$200 Cash Back
One time bonus: $200 after $500 spend in 3 months from account opening

No Annual Fee

Capital One Savor One
$200 Cash Back
One time bonus: $200 after $500 spend in 3 months from account opening

No Annual Fee

American Airlines AAdvantage MileUp Card
10K miles + $50
Earn 10K AA miles + $50 statement credit after $500 spend in 3 months

No Annual Fee

The Amex EveryDay® Credit Card from American Express
10K points
10K after $1K spend in 3 months. Terms apply.

No Annual Fee

Info about this card has been collected independently by Frequent Miler. The issuer did not provide the details, nor is it responsible for their accuracy.

Alternate offer: Some find they are targeted for an offer of 20K after $2K spend in the first 3 months.

Discover it® for Students
$50 + First Year Double + $20/year
Get $50 after first purchase. All cashback earned in first 12 months will be doubled including 5% earned in rotating categories. Plus, get $20 cash back each school year your GPA is 3.0 or higher for up to the next 5 years.

No Annual Fee

Hotels.com Rewards Visa Credit Card
$125 Reward Night
Get a reward night worth $125 when you spend $1,000 on purchases in the first 3 months. Excludes taxes and fees. If your reward night costs less than $125, you won't get the difference.

No Annual Fee

Wyndham Rewards Visa issued by Barclays
30K points
30K: 15K after first purchase plus 15K after $1,000 spend in 90 days (note that you'll need to choose the annual fee card after clicking through)

$75 Annual Fee

Discover it Miles - Double Miles your first year
$100 + First Year Double
Get $100 after first purchase. All "miles" earned in first 12 months will be doubled. This makes this a 3% cash back card for the first year.

No Annual Fee

Royal Caribbean® Visa Signature® Credit Card
10K points + $50 Air2Sea program discount
10K points + $50 airfare discount: 10K after first purchase in the first 90 days + $50 Air2Sea program discount after $3.5K total in first 90 days (excludes students)

No Annual Fee

BBVA
ClearPoints Credit Card
$100 statement credit
$100 statement credit after $1.5K in first 90 days. Note: This card is not available online without an invitation code. You may need to first open a checking account and then apply by phone or apply in-branch.

No Annual Fee

Discover it®
$50 + First Year Double
Get $50 after first purchase. All cashback earned in first 12 months will be doubled including 5% earned in rotating categories.

No Annual Fee

Citizens Bank Cash Back Plus® World Mastercard®
5% back everywhere until 3/31/20
5% back everywhere through 3/31/19: Card ordinarily earns 1.8% back everywhere. There is currently an in-branch offer to earn an additional bonus of 3.2% back everywhere through 3/31/20 (to be paid out in May 2020)

No Annual Fee

Citi Double Cash Card

Recent better offer: None

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, some cards earn 2 miles per dollar.  The Amex Blue Business Plus credit card earns 2 Membership Rewards points per dollar on up to $50K spend per year. And the Citi Double Cash card earns 2 cents per dollar uncapped. Those cash rewards can be converted to Citi ThankYou points and then to airline miles. With these 2X everywhere cards 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:

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 Medallion Qualifying Miles (towards elite status). At $60,000, $90,000, and $120,000 you’ll get another 15,000 Medallion Qualifying Miles.
  • Amex Delta Platinum or Delta Platinum Business: Spend $25,000, get 10,000 Medallion Qualifying Miles (towards elite status). At $50,000 spend, get another 10,000 Medallion Qualifying Miles.
  • Southwest Plus, Southwest Premier, or Southwest Business: With Southwest, when you earn 125,000 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: $2.00, $2.55, or $2.58 (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:

The biggest problem with this is the IRS imposed 2 payments per processor limit. This means that you can liquidate no more than 6 gift cards per type of tax payment.  In the past, Official Payments allowed more payments via phone.  Recent reports, though, indicate that this is no longer the case.

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

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