You can pay your taxes with a credit card or debit card, but the IRS processes these payments differently from other payments. Since taxes are a guaranteed payment from the government, the IRS prefers to use ACH transfers to process debit card payments rather than credit cards.
In this post, we review the following: Can You Pay Taxes With A Debit Card, what is the fee for paying taxes with credit card, can you pay your property taxes with a debit card, and irs payment plan.
Can You Pay Taxes With A Debit Card
If you’re expecting a tax refund, it might seem like a great idea to pay your taxes with a credit or debit card. But before you do that, it’s important to understand how the IRS handles these types of payments and whether they’ll work for your specific situation.
The IRS allows you to pay your taxes with a debit or credit card.
- You can pay taxes with a debit or credit card.
- The IRS allows you to pay your taxes with a debit or credit card, which is convenient and easy but comes with fees.
- Most major tax-preparation websites offer this service because it’s more convenient for customers and helps them save money on the cost of postage stamps and envelopes, but be careful when choosing a payment processor—some charge additional fees above what you would pay if using your own bank’s debit card.
You can pay your taxes with a credit or debit card by phone, over the internet or through a mobile device.
You can pay your taxes with a credit or debit card by phone, over the internet or through a mobile device, but debit cards are not accepted.
Credit cards are preferred to debit cards because they have lower fees and the process is usually faster.
Only certain phones and internet devices will work with this service.
Most major tax-preparation websites offer this service.
Most major tax-preparation websites offer this service. If you’re using one of the big names—like TurboTax, H&R Block, TaxAct or Credit Karma—you should be able to pay your taxes with a debit card without any issues.
But be careful when choosing a payment processor — they often charge high fees.
A tax payment processor charges fees for using their services. The fee can range from 1 to 3 percent of your payment amount, so you’ll want to find a processor that offers competitive rates. You may also pay a flat fee for each transaction, or you might have to pay a percentage of your total payment.
Payment processors like Dwolla, Square and Chase Paymentech work with debit cards; Venmo works with credit cards; and PayPal Here works with prepaid debit cards.
If you’re paying taxes online and hold an account at a bank or credit union that offers free bill payments through its website, then select the option on its site instead of going through an outside company like Dwolla or PayPal Here (which both charge $0.25 per transaction).
Paying your taxes with a credit card effectively turns the IRS into a creditor, so make sure you have the cash on hand to pay off that debt.
I have a love-hate relationship with the IRS. Yes, they’re the tax collector for the U.S. government and generally responsible for making sure my salary is being taxed appropriately and that I owe them whatever amount they say I owe them, but when it comes to actually paying them, things can get a little weird.
But what if paying your taxes with a credit card was not only possible but easy? Well, it is! And you can even use this process to pay off your balance today like you were doing any other bill—and yes, it’s all legal (and verified by independent sources). The catch is that you need to be careful: in some cases, paying taxes with a credit card might cost more than just paying with cash or check at checkout time would have done had there been no tax due at all!
Taking out a loan to cover your tax bill is a bad idea, because the interest rates and fees are far too high.
- Fees. The rate of interest on a loan is typically much higher than the rate of interest charged by credit cards, but that’s not the only reason why it’s a bad idea to take out a loan to pay taxes. Many tax preparation services charge fees for their services, which can be as high as 30% of your total bill (yikes!). These fees are considered taxable income and aren’t tax deductible—meaning that if you take out a $1,000 loan at 30% APR so that you can pay your taxes with cash this year, you’ll end up paying about $350 in interest alone. That’s more than double what most people would have paid on their tax bill had they used one of our recommended methods instead!
- Interest rates are higher than credit card rates. In addition to being subject to steep fees that aren’t deductible from your income taxes, taking out an unsecured personal loan will also mean paying higher-than-average interest rates—sometimes much higher! For example: A $10k unsecured personal loan with an 18% APR would cost over $2k in interest over the course of five years; meanwhile, even assuming very conservatively low usage patterns like 20% annual utilization split evenly across all four quarters ($5k total), according to Credit Karma’s latest data update from July 2019 three different card companies offer effective APRs between 13%-15%.
Some people use debt cards as part of their budgeting strategies, but paying taxes with plastic makes it hard to stick to that strategy.
Paying taxes with a debit card is not recommended. If you’re paying off debt, using credit cards to do so can get you into trouble. If you’ve ever been tempted to pay for everything with plastic, consider how much interest you’ll be paying on your bills if your balance grows.
If you’re making minimum payments each month and adding nothing extra, it may take years for your debt to go away—even longer if there’s interest added on top of what you paid toward the principal balance! And don’t forget about all those fees that can add up quickly when using a credit card: annual fees, late fees, overlimit fees… The list goes on and on!
The IRS allows you to pay your taxes with a debit or credit card
It’s possible to pay your taxes with a debit or credit card. The IRS allows you to make an online tax payment with a debit card, as long as you sign up for the Electronic Federal Tax Payment System (EFTPS).
You can pay online at the IRS website, by phone at 800-555-1213 or through a mobile device if you have registered for this service.
If you choose to use an automated phone system, it will ask for your social security number and other personal information in order to verify who is making the payment so that they have full access to all of their accounts without any problems later on down the road when they try doing something else such as filing taxes or getting more money back from what was withheld originally during payroll deductions before filing income taxes properly accordingly.
what is the fee for paying taxes with credit card
Charging your tax bill to a credit card can make financial sense. Here’s how one woman did it.
As tax season is here, many consumers might wonder how they’ll pay the IRS this year.
You can pay taxes with your credit card, but it usually comes with fees. At minimum, there will be a payment processing fee ranging from 1% to 2%. The IRS breaks down the fees for each payment processor here.
On top of payment processing fees, your credit card will charge you interest unless you pay your balance off at the end of your billing cycle (averaging around 15.78% according to the Fed’s most recent data).
But there are times when charging taxes on your credit card could make sense, even though it’s not usually advised. Select spoke with Ashley Patrick of Budgets Made Easy who used a 0% APR offer that came with her Bank of America® Customized Cash Rewards credit card to pay $6,000 in taxes in 2015.
At the time, Patrick had some money in savings, but she didn’t want to drain her emergency fund to pay her tax bill. She and her husband wanted to pay it over time, and when she got the 0% offer from her credit card, it gave her the opportunity to pay her taxes interest-free over 18 months (though Patrick and her husband were able to pay it off more quickly).
Patrick and her husband have since taken steps to ensure they are more financially prepared and rely less on credit cards for big expenses. The couple now has six months’ worth of savings, no debt and they pay their credit card balance off every month.
“My experience using [my credit card] was pretty easy,” Patrick says, explaining it prevented her from being stressed out because she didn’t owe money to the IRS and she didn’t have to use all of her savings.
It also inspired her and her husband to overhaul their finances. When they couldn’t come up with enough cash to pay their taxes, they decided to get a firm idea of how they were spending and learned how to save more. They cut their dining out budget in half and put that money toward paying down debt.
“Owing the money on the credit card is what sparked my search for debt payoff plans,” says Patrick, who went on to pay off a $14,000 car loan and $25,000 worth of student debt promptly after repaying the credit card.
“It was the catalyst that started us on the journey to financial freedom,” says Patrick.
Now, Patrick and her husband have six months’ worth of savings in an emergency fund. Experts say that putting money into a high-yield savings account is one of the best ways to stay ahead financially because, when unexpected expenses arise, you’re prepared.
“Financial freedom to us is not worrying about the next paycheck,” explains Patrick. “Not worrying about if my husband loses his job … Even now with Covid-19, my husband lost 25% of his income and we aren’t stressed. That’s financial freedom to me.”
If you have to make a large payment you haven’t had time to save for — a big tax bill or an emergency expense — a 0% APR credit card, like the the Citi Simplicity® Card or the U.S. Bank Visa® Platinum Card, can be a good back-up.
Keep in mind you need good to excellent credit to qualify for these and other best no-interest cards. And once you’re approved you often have to wait for the card in the mail, unless you get a card with instant access.
But if you have limited time, you can check to see if one of your current credit cards has a 0% APR offer in the form of a convenience check, which is what Patrick used. Convenience checks often count as cash advances, which come with their own fees. Make sure to do the math to see if the money you save on interest is greater than what you have to pay in fees.
If using a 0% APR credit card is not an option, another option is a short-term personal loan.
Personal loans have lower average APRs than credit cards (around 9.5% according to the Fed). Your rate is usually fixed, which means that you will make the same monthly payment until the loan is paid off. You can pay back a personal loan over just a few months or up to three years and sometimes even longer. Longer term lengths typically have higher APRs.
Getting a personal loan can sometimes be easier than getting approved for a new credit card, which is something to consider if you have a fair or average credit score. This is particularly important to keep in mind while card issuers are tightening requirements for new credit cards.
Paying taxes with your credit card isn’t recommended, as it comes with processing fees and the possibility of paying interest if you can’t pay off the balance right away. But if that choice is the only one available to you, it could be better than owing the IRS.
If you’re considering using a credit card to pay taxes, be sure to double-check the APR offer and map out your debt repayment plan. Also, you may consider looking for ways to revamp your budget, set new savings goals and get motivated to pay off any other debt.