Credit Cards

Why I paid my taxes with a credit card this year

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I have an evergreen “how to pay your taxes with a credit card” article which you can find here, but I wanted to share my own personal experience. I’ve always paid my estimated business taxes with a credit card, and I have family members who pay their estimated taxes with a credit card, but this was the first year I paid my federal taxes via credit card. So…how did it go and what was it like?

Why did I do it?

Primarily because I can arbitrage the processing fee and earn more value in points than I’m paying in fees.

Which card did I use?

I paid our personal federal and my business taxes with my Bilt Mastercard® and our state taxes with a Capital One Venture X. I should have paid with my Bilt Mastercard on rent day ( 4/1/24 ) to earn double points, but I was in Latvia and totally forgot.

I principally interested in getting my yearly spend above $25k so I’m eligible for 125% bonus transfer when they offer them.

That effectively means I’m earning 2.25 points when I choose to move them ( They’ve offered this bonus on Flying Blue, Emirates, Virgin, IHG, and Aeroplan ). Those 2.25 points are easily worth 4 cents per dollar when redeemed on Flying Blue, Aeroplan, Emirates, or Virgin; however, not when used on IHG ( that’s a bad transfer imo ).

I paid the other with Venture X because every purchase earns a fixed 2x per dollar and those points are easily worth 1.5 cents a piece meaning I’m netting out a minimum of 3 cents on a 1.87c fee.

What’s the cost?

I paid a 1.87% fee to use Pay1040 which is an authorized IRS tax processing agent. I’m not sure why I didn’t choose payUSAtax since it offers a slightly lower fee, but I hastily chose Pay1040.

Pay taxes with credit card fees

What information do you need?

As soon as you choose a payment agent, you’ll need:

  • Total payment owed
  • The type of taxes you’re paying – the form number
  • Your Social
  • Your Spouses Social should you be filing joint
  • OF course your credit card

Documenting your taxes

Another reason this is quite beneficial is having a very straight forward record of payment. Several years ago I was told that I hadn’t paid some estimated taxes for my business in California. I didn’t have to dig through checks, etc to find a record and chase it down, I merely forwarded the payment receipt that had been emailed to me after payment. The one I received on my personal looked like this:

a screenshot of a black and white message

Is it right for everyone?

No… I’d highly suggest reading the full article, but if you can arbitrage the fee it can make a lot of sense. It’s especially valuable if your taxes can help you hit a big minimum spend requirement and unlock a massive bonus. Either way…this is what I did, and happy to have done it!

Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.

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1 Comment

  • ss April 15, 2024

    I used pay1040 this year and had a mini freak out when the vendor names was Federal Credit Union. After some googling found out it was fine, but always pay attention when paying money online.

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