This story is a part of Taxes 2023, CNET’s protection of one of the best tax software program, tax suggestions and every little thing else it’s essential file your return and observe your refund.

If you happen to owe the IRS cash for taxes this yr, it’s possible you’ll surprise in case you can pay your taxes with a bank card. Whereas the reply is sure, that does not imply you must. 

Paying your tax invoice with a bank card leads to processing charges and potential curiosity fees in case you’re unable to repay your steadiness in full on the finish of the month. However there are a number of circumstances the place it could be worthwhile, significantly in case you can earn a excessive welcome bonus or offset charges with the rewards you earn.

We’ll clarify how one can pay your taxes with a bank card, break down the prices and stroll you thru a number of eventualities the place this fee technique could make sense.

How do you pay taxes with a bank card? 

If you happen to’re submitting your taxes on-line with a tax software program supplier like TurboTax or H&R Block, you’ll be able to normally enter your bank card quantity immediately on the software program supplier’s web site when submitting. It’s also possible to pay your taxes immediately with the IRS on-line or by telephone at 888-729-1040. 

The utmost variety of bank card funds you can also make will depend on your tax sort. You would possibly solely be capable to make as much as two bank card funds per thirty days, quarter or yr. You will additionally should pay a minimal $2.50 payment relying on the processor and quantity owed. 

How a lot does it price to pay your taxes with a bank card?

The IRS enables you to pay your taxes by a third-party processor, however there is a payment. The cost will fluctuate relying on the fee processor. Here is a breakdown primarily based on the processor and the bank card payment, relying on the fee quantity from the IRS. 

Many tax software program suppliers, similar to TurboTax and H&R Block, additionally cost their very own processing charges for bank card funds or could merely cross on the processing payment from the IRS to you. It is typically dearer to make use of a bank card to pay your taxes with a tax software program supplier than it’s to pay through the IRS portal immediately.

Are you able to pay estimated taxes with a bank card?

Freelancers, facet hustlers and enterprise homeowners who earn wages that would not have taxes withheld are on the hook for making estimated tax funds to the IRS 4 occasions a yr. If you happen to fall into this class, you could be contemplating utilizing a bank card to maximise money again, factors or miles in your favourite bank card.

We solely suggest doing this in case you can earn extra in rewards than you will pay in processing charges. The IRS enables you to use a bank card to pay your estimated taxes — IRS type 1040-ES — twice per quarter. So in case you usually make month-to-month or bi-weekly funds to the IRS and need to begin utilizing a bank card, you will need to as a substitute restrict your estimated tax funds to a few times per quarter.

Learn extra: Aspect Hustle Taxes Are Difficult. 5 Suggestions I Want I Knew After I Began Freelancing

When must you pay your taxes with a bank card?

It might make monetary sense to pay your taxes with a bank card if:

The rewards outweigh the prices

The largest perk of paying your taxes utilizing a bank card is the rewards you will earn. As an example, in case you’re paying $1,000 in taxes utilizing a flat-rate 2% money again bank card, you will earn $20 money again. However relying on the processing payment, it’s possible you’ll barely break even as a result of the payment ranges between $18.50 and $19.80. 

A welcome bonus will offset IRS charges

If you happen to’re opening a brand new bank card with a welcome bonus, you might be able to meet the spending requirement for it by paying your taxes. This selection could also be extra profitable compared to paying your taxes utilizing a bank card you have already got. 

For instance, as an instance you open the Chase Freedom Flex℠* to earn a $200 bonus after you spend $500 on purchases in your first three months from account opening. If you happen to use this card to pay a $1,000 tax invoice throughout the three-month time-frame and earn the $200 welcome bonus, it could be worthwhile. After you subtract the IRS processing payment, you will basically earn about $180 with the bonus.

You want some respiratory room

Whereas we do not advise taking over bank card debt if you cannot repay the steadiness in full when your subsequent invoice is due, a 0% introductory APR bank card might be useful when used responsibly. If you happen to want extra time to pay your tax invoice in full, you can save on curiosity through the use of a 0% introductory APR card. 

Many 0% introductory APR playing cards provide 12 to 20 months’ price of reprieve from curiosity. Simply ensure you can repay the steadiness in full earlier than the 0% introductory interval ends — in any other case, the curiosity fees you will accumulate could price you way more than an IRS fee plan would. 

Drawbacks of paying taxes with a bank card

You’ll be able to’t keep away from processing charges

Whether or not you are paying with a debit or bank card, you will be charged a processing payment by the IRS. And the bank card processing payment is larger than you’d pay through the use of a debit card. For instance, in case you’re paying $2,500 in owed taxes utilizing payUSAtax, you will pay a $2.20 processing payment together with your debit card however $46.25 together with your bank card — a giant distinction that is probably not price it, relying in your objective for paying together with your bank card. 

And, in case you can afford to pay the invoice in full, you’ll be able to keep away from processing charges altogether by paying immediately out of your checking account relatively than coming into your debit card. You will simply want to offer the IRS together with your account and routing numbers.

Your credit score utilization ratio could enhance

Relying in your credit score restrict, it’s possible you’ll enhance your credit score utilization ratio in case you pay your tax invoice together with your bank card. As an example, in case your card restrict is $2,000 and your taxes are $1,600, the excessive utilization could trigger your credit score rating to drop.

Most consultants suggest preserving your credit score utilization under 30%. So in case you’re planning to pay your taxes together with your bank card, you must use one with a a lot larger restrict than your tax invoice, or pay as a lot of the tax invoice as you’ll be able to, then cost the remainder to your bank card to maintain your credit score utilization decrease. Both means, do your greatest to pay the steadiness in full by your fee due date to keep away from the upper steadiness being reported and paying curiosity. 

Alternate options methods to pay your taxes

In virtually all circumstances, we do not suggest paying your taxes with a bank card in case you’ll be unable to repay the steadiness instantly. 

“For many who cannot pay their taxes, the IRS fees a decrease rate of interest than standard bank cards,” says Los Angeles CPA Rob Seltzer, referring to the company’s fee plans. If you happen to want extra time to file, you can even look into submitting an extension with the IRS — however even with an extension, it’s possible you’ll incur penalty charges in case you do not pay on time (this yr’s due date is April 18). 

Earlier than signing up for a 0% introductory APR bank card, contemplate an IRS installment plan. The IRS presents fee installment plans to assist unfold out your tax funds. You’ll be able to select between short- and long-term plans, relying in your wants. There are setup charges for these plans, and charges fluctuate relying in your installment plan and whether or not you apply on-line, through telephone, by mail or in particular person. If you happen to pay any portion of your invoice after the due date (April 18, 2023, for many), you will incur curiosity and penalties. Nonetheless, rates of interest the IRS fees for late funds and late submitting are a lot decrease than common bank card APRs.

Though it’s possible you’ll not be capable to earn rewards or keep away from charges with IRS fee plans, you can stretch your funds over time. And it is a great way to keep away from bank card debt if you cannot pay the invoice in full instantly. 

The underside line 

You’ll be able to pay your tax invoice with a bank card, but it surely’s not at all times the most suitable choice. We suggest doing the maths first to verify any potential rewards or welcome bonuses are larger than the processing charges you will pay. If you happen to want extra time to pay, a 0% introductory APR card will help — however we recommend evaluating this feature to an IRS installment plan to seek out one of the best fee technique to your monetary state of affairs.

Extra tax recommendation

• Create an On-line IRS Account to Begin Your Taxes in 2023
• New Tax Guidelines for Venmo and Money App Earnings: Every little thing You Have to Know
• The IRS Is Accepting Tax Returns. 7 Steps to Take for a Larger Refund

*All details about the Chase Freedom Flex has been collected independently by CNET and has not been reviewed by the issuer.

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