On October 19, the IRS officially announced a new rule allowing it to accept credit and debit card tax payments directly in the future, without requiring taxpayers to use a third-party payment platform. This is good news for people who regularly pay taxes with a credit card to help meet a card’s welcome offer spending requirement.
For now, federal taxes paid by credit card are handled mainly through two third-party platforms, Pay1040 and ACI Payments. Their fees are:
- Pay1040: 1.75% for personal credit cards and 2.89% for business cards.
- ACI Payments: 1.85% for personal credit cards and 2.95% for business cards.
- Even if the IRS accepts credit cards directly in the future, it can still charge users a fee. Paying taxes by card won’t be free.
The biggest change under the new rule is that the IRS can contract directly with payment service providers and pass the fees it pays on to taxpayers. The rule requires the IRS to keep fees as low as possible and prohibits it from profiting from them. As a result, fees for paying taxes by card directly through the IRS could be lower than they are now. However, no specific rates have been announced, and there’s no confirmed launch date for the new payment channel.
In our earlier guide, How to Pay Federal Taxes with Credit Cards, we covered various ways to pay taxes, including using credit cards to meet welcome offer spending requirements, making quarterly estimated tax payments, payment frequency limits, and paying business card taxes with PayPal. The main value of paying taxes by credit card is earning a welcome offer. For example, if you pay $10,000 in taxes with a 2% cash-back card and pay a 1.75% fee, you’ll still come out $25 ahead after the $175 fee. If you’re paying the fee to earn a welcome offer worth hundreds or even thousands of dollars, it’s an even better deal.
