Since 2014 Miss QCI and I have signed up for 11 credit cards specifically for the purpose of earning the bonus rewards (points) which require a certain amount of spending in a short time period. We’ve used the points for cash back and free travel over the years including our trip to Hawaii. Until recently I wasn’t aware that you could actually pay your taxes owed from filing your taxes with a credit card. I also ran out of checks and am adamant on not getting more which forced me to dig into the possibility.
The most recent card I signed up for was the Starwood Preferred Guest Credit Card from American Express. The bonus is 25,000 points after $3,000 spend in 3 months, but they recently had a promotion offering an additional 10,000 points after spending a total of $5,000 in 6 months. This sweetened the deal and put my over the edge on signing up for this card. Thus I’ve been looking for ways to maximize spending on this card and having to pay in to Uncle Sam gave me the perfect opportunity. (side note: I actually made less as a W2 employee in 2016 but my untaxed income including real estate investments, blog income and dividends all crept higher meaning I had to pay in.)
Before I start, I want to point out that you should absolutely do research on the value of the points earned versus the service fees that are charged for paying your taxes with a credit card. For me it’s all about the signup bonus and for that reason I was happy to pay the service fee.
Paying Federal Income Taxes with a Credit Card
The website for paying federal income taxes with a credit card is https://www.1040paytax.com/, powered by Drake Software, the same company one of my favorite bloggers, The Wealthy Accountant recommends for preparing your taxes. They charge a 1.98% credit card convenience fee which is actually pretty reasonable given that you can get 2% back with the Citi Double Cash credit card (plus you don’t need to waste a stamp!).
You’ll eventually get forwarded to www.payusatax.com and after selecting “Make a Personal Payment” the process is straight forward as you are asked to provide your personal information. I paid $886 in taxes which resulted in $17.54 fee. Not bad!
Paying State Income Taxes with a Credit Card
The process for paying your state income taxes with a credit card may depend on the state you reside in. A simple Google search or asking your tax preparer for the website will help you verify the correct site. However it seems as though some states use the same provider called Official Payments. For Wisconsin the website can be found by navigating through the Wisconsin department of revenue website. It’s a bit tricky to find the online payment via credit card (not via bank account), but I was able to find it digging into the frequently asked questions. Here is a direct link to the Official Payments website where payment can be made. You’ll then want to click on “State Payments”. The image below is what I filled out at the beginning of the process to pay my own taxes.
The fee for paying my state individual income taxes with a credit card was slightly higher than federal at 2.5%. Below is how they determine the service fee:
Official Payments Corporation (OPC) charges the taxpayer a convenience fee of $1.00 for payments less than $40.00 or 2.5% of the payment amount for payments greater than $40.00.
Below is a screenshot from my payment confirmation, but you’ll also receive an email which includes payment information and your confirmation number.
Paying your taxes with a credit card is a great way to meet minimum spending requirements as long as you pay off your credit card in full every month. I plan to do this on a yearly basis provided that I continue to pay in as opposed to receive a refund. I’d love to hear in the comments whether you’ve paid your federal or state individual income taxes via credit card and particularly whether your state uses Official Payments.