When tax season rolls around and you’re short on cash, it can be tempting to pull out the credit card to pay your balance. The same goes for whether you’re looking at this year’s bill or planning ahead with your quarterly estimated payments. Either way, the IRS does allow you to pay with credit cards—but before you do, it’s worth weighing the cost of that convenience.
How the IRS Handles Credit Card Payments
The IRS partners with authorized payment processors to accept credit card transactions. That means you can use major cards like Visa, Mastercard, Discover, or American Express to pay what you owe. But there’s a catch. Unlike retailers who absorb transaction fees as a cost of doing business, the IRS passes those fees on to you.
These fees—called convenience fees—typically range from 1.75% to 1.85% of the total amount you’re charging, with minimums around $2.50. That means a $1,000 tax payment could cost you roughly $17.50 in additional fees. That translates to more money if your total tax bill ends up being higher.
On top of that, if you don’t pay off your credit card balance right away, interest will start to accumulate. With credit card APRs hovering around 20% or more, that tax payment can quickly become a much larger expense.
Pros and Cons of Paying Taxes with a Credit Card
As with any decision, there are pros and cons to paying with a credit card. Weighing your options and being aware of the differences can help you make the right call.
The Upside:
Using a credit card can be a quick solution, especially if you’re close to a payment deadline and need more time to come up with the funds. It can also help if you’re trying to hit a minimum spend for a credit card bonus or rack up points or miles on a rewards card.
The Downside:
Between convenience fees and high credit card interest rates, this method often ends up being one of the most expensive ways to pay your taxes—especially if you don’t pay your card off right away. Plus, the IRS limits credit card payments to two per year per tax form, so it’s not an ideal recurring solution.
Other Alternatives to Consider
If you’re unable to pay your tax bill in full, consider these lower-cost options:
1. IRS Payment Plan:
The IRS offers installment agreements that allow you to pay your balance over time. While there is a setup fee and some interest, it’s typically much lower than what a credit card company would charge. That way, you can save if you won’t be able to pay your credit card bill for your transaction cycle.
2. Plan Ahead for Next Year:
Use this year as a learning opportunity. Adjust your withholdings or make estimated tax payments to avoid the same catch next year. Setting aside a manageable amount throughout the year is easier than scrambling to cover a large balance in April.
Let NSO & Company Help You Make the Right Move
Using a credit card to pay your taxes might feel like a quick fix, but it’s not always the best financial choice. At NSO & Company, we help you assess your options, create payment strategies, and plan ahead so you’re not caught off guard next year. Whether you’re looking to avoid penalties or minimize unnecessary fees, we’ll help you stay in control of your finances—tax season and beyond.