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When you owe money to the Internal Revenue Service (IRS), you have a few options to make your tax payment. You can use IRS Direct Pay to have your payment withdrawn from your bank account for free; you can send a check to the IRS; or you can pay with a debit card or a credit card. If you pay with a debit card or a credit card, you must use one of the three approved payment processing services and pay either a flat fee (with a debit card) or a percentage of the amount of the transaction (with a credit card).
I had always sent a check to the IRS the previous years, but for my 2018 tax payment, I decided to pay by credit card. If you also plan to pay with a card, here's how the process works.
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Pay your taxes with a credit card
To begin the process of paying taxes with a credit card, choose one of the following three payment processors:
Each of these payment processors allows payments online or over the phone. I chose Pay1040.com because the fees were the lowest. Nevertheless, 1.87% is a big amount that can dramatically increase your tax bill – so it's usually best to avoid charging your taxes unless you have a credit card that gives you enough money or rewards to cover it. In my case, I have a card that gives 2.62% cash back, so it was worth paying the fee because I earned 0.75% cash back after the payment expenses.
When you have selected your payment processing service, you then choose the type of tax payment you wish to make. You have many options, including paying professional and personal taxes. For example, you can make payments based on your Form 1040, amended returns, or if you make a payment with a request for an automatic tax extension. You can even make a payment for more obscure tax situations, such as when you have to pay a trust recovery penalty. It is important to select the right type of payment so that the IRS can process it properly.
In my case, I had to make two separate payments: one for the taxes I had for 2018 and one for the estimated taxes for 2019. This meant that I had to deal with two transactions. The good thing is that the process is simple.
The steps to pay with your card
Once you have chosen the correct form, you will need to take a few extra steps to process your payment. This includes:
- Choose the year for which you submit the payment.
- Entering the exact amount of the payment (you will need to know how much you need in order to be able to pay the correct balance).
- Specify if you are filing taxes from the United States or from outside
- Entering personal information such as social security number, date of birth and address. If you file a joint return, you will have to enter both your own information and that of your spouse. In my case, my husband was the main taxpayer and so I had to indicate his social security number and other details, as well as mine.
- Enter your credit card information.
The transaction is processed quickly and the money is automatically sent to the IRS. You will receive a receipt from the payment processor that you used. I saved mine in PDF format with my tax forms to prove that I had made my payment on time. Remember, it's just for payment – you must always file all required tax forms separately with the IRS.
Confirm your payment
Once I submitted my tax forms, I wanted to make sure everything was handled properly. Pay1040.com has a simple web form that you can fill out to confirm that the IRS has correctly applied the payments made through the processor service. I had to enter my husband's social security number, the last four digits of our credit card number and the amount of our payment to receive a confirmation.
You can also login to your IRS account or create an account if you do not already have one. Creating an account takes about 10 to 15 minutes and you must confirm your identity by providing a credit card number or number to another account, such as your mortgage or student loan.
When I logged in to my IRS account just five days after using Pay1040.com to process my payment, the IRS was already showing that both payments had been received and correctly applied for my 2018 tax bill and my 2019 budget. .
Do you have to pay your taxes with a credit card?
There are really only a few reasons why you can pay taxes with your credit card.
One of the reasons is to win rewards, which was my motivation. But for many people, it does not make much sense because the fees are very high. You need a very good cash back card and you must have a lot of money to make it worth it.
Another reason to pay with a card is if you do not have the money to pay your tax bill when it is due. But the cost of interest and payment fees with a card may be higher than the interest and late payment penalties billed by the IRS, so be sure to do the math. If you have a card that offers generous rewards or cash back to offset the processing fee and it has a promotional rate of 0%, pay with your card has a mathematical sense. If not, you should consider the payment plans of the IRS to see if they are more affordable.
You should not pay with a card for convenience only, as there is no reason to charge 1.87% or more when the money directly into your bank account is directly debited.
You now know the process of paying taxes with a credit card
If it makes sense to pay your taxes with a credit card, you now know the basic process. To pay your taxes with your card, you simply choose the most affordable third party payment processor, enter your tax information and confirm a few days later that your payment has been correctly received.
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