Pay Taxes With a Credit Card: Fees, Rewards & Tips

Key takeaways

• Confirm you can pay federal taxes with a credit card through an IRS-authorized processor or a platform like Melio.
• Weigh the processing fee of about 1.75% to 1.85% against the rewards or cash flow you gain before you pay.
• Avoid carrying a balance, since the interest usually outweighs any rewards you earn.
• Choose a rewards or 0% APR card to turn a required tax payment into cash back, points, or extra float.

Can you pay taxes with a credit card?

Yes, you can pay taxes with a credit card. The IRS lets you pay federal taxes through its authorized payment processors, and you can also pay by card through a platform like Melio, even when the biller does not take cards directly.

Many business owners choose this route because taxes can strain cash flow, especially when they are due during a slow season. Paying late has consequences:

1. The failure-to-pay penalty is 0.5% of the unpaid balance for each month or part of a month it goes unpaid, up to 25%, and it drops to 0.25% per month once you set up an installment agreement.
2. You can set up a payment plan with the IRS. A short-term plan has no setup fee, and a long-term plan has a setup fee of up to $178 depending on how you apply, plus interest.

Paying by card is one way forward-thinking owners avoid that squeeze while earning value on a bill they have to pay anyway. If you have wondered, should I pay bills with a credit card, taxes are a strong case for it.

Benefits of paying taxes with a credit card

Credit cards are already transforming B2B payments, helping small businesses manage large expenses more flexibly, including tax obligations. Just as businesses use an early payment discount from vendors, paying taxes by card lets you time payments to your advantage.

• Earn rewards: put a large tax bill on a rewards card to earn cash back, points, or miles.
• Gain free float: hold onto your cash until your card statement is due, without filing extra forms.
• Hit a sign-up bonus: a big tax payment can help you meet the minimum spend on a new card.
• Avoid interest: a card with a 0% introductory rate lets you spread the cost if you pay it off before the period ends.

These perks are just a few examples of how business credit cards work to support cash flow and earn value on essential expenses.

Drawbacks of using a credit card to pay your taxes

Don’t charge taxes to a card you can’t pay off in full. Carrying the balance means interest that usually outweighs any rewards.

Instead, talk to your accountant or tax adviser about an IRS payment plan, which charges a lower rate than most credit cards. In some years it may even make sense to owe on your taxes rather than get a refund, so you can benefit from paying by card.

Be mindful of credit card processing fees. Paying the IRS by credit card runs about 1.75% to 1.85% of the payment, with a $2.50 minimum, and most other billers pass along a similar percentage fee. If security is a concern, consider a single use virtual card (SUVC), a one-time card number that adds a layer of protection for large payments like taxes.

How to pay your taxes with a credit card

Paying your taxes by card takes just a few steps.

1. Confirm the tax you owe and the amount.
2. Choose an IRS-authorized payment processor, or pay the bill through Melio.
3. Enter your card details and the payment amount.
4. Review the processing fee before you confirm.
5. Submit the payment and save the confirmation for your records.

Is paying taxes with a credit card worth it?

It comes down to simple math. Paying by card is worth it when the rewards you earn or the cash flow you gain are worth more than the processing fee.

If a rewards card returns more value than the fee, or you need to hold onto working capital, paying by card can pay off. If you would carry a balance and pay interest, it usually is not. Follow key business credit card tips, like using a 0% APR card, paying the balance quickly, and tracking your spending.

Ready to pay your next tax bill by card and keep more cash on hand? Sign up for Melio to get started.

Paying taxes with a credit card FAQs