The IRS accepts credit card payments, but you pay a processing fee and the card company treats it like a cash advance
You can pay your federal income tax bill with a Visa, Mastercard, American Express, or Discover card. The IRS does not take the payment directly — instead, you use one of two payment processors the IRS has contracted with: PayPal or 2nd Story Software. Both charge a fee (usually 1.87% to 2.35% of your payment) that you pay on top of your tax bill. Your credit card company will also treat the transaction as a cash advance, which means you start paying interest when ready — there is no grace period like there would be for a regular purchase.
This route makes sense only if you have a specific reason: you need to earn rewards points on a large payment, you want to spread the cost across a billing cycle, or you are short on cash right now and can pay the card off quickly. If you are paying late and facing penalties, the fee and interest will make your total cost higher, not lower.
Key Takeaways
- Credit card payments to the IRS go through PayPal or 2nd Story Software, not directly to the IRS, and both charge a processing fee of roughly 1.87% to 2.35%.
- Your credit card company treats the payment as a cash advance, so interest starts accruing when ready with no grace period.
- You can pay through IRS.gov, the IRS2Go app, or by calling the payment processor directly — all three routes use the same two processors.
- The processing fee is not tax-deductible, even though you are paying a tax bill, because it is a payment processing cost, not a tax.
- If you cannot pay in full, a payment plan through the IRS (Form 9465) or an Offer in Compromise may cost you less than credit card interest and fees combined.
How to pay through the IRS website or app
Go to IRS.gov and look for "Pay Your Tax Bill" or use the IRS2Go mobile app. You will see a list of payment methods. Select credit or debit card. The IRS will ask you to choose between PayPal and 2nd Story Software. Both will show you the exact fee before you confirm the payment, so you know the total cost upfront.
You will need your Social Security number or Individual Taxpayer Identification Number, your tax year, and the amount you want to pay. If you are paying a bill from a prior year, have that notice handy so you can enter the correct tax year. The processor will give you a confirmation number when ready — save this. It is your proof of payment.
Processing time varies. Most payments post to your IRS account within one business day, though some take up to three. Your credit card company will show the charge within one to two business days depending on your bank.
Paying by phone or through the processor directly
You can also call PayPal at 1-844-PAY-IRS1 (1-844-729-4771) or 2nd Story Software at 1-855-PAY-1040 (1-855-729-1040) to pay over the phone. Both lines are open during IRS business hours. Have your tax information and credit card ready. The processor will quote the fee, you confirm, and you get a confirmation number on the spot.
Paying through the processor directly can be faster if you have questions about the fee or your account. The processor can also help if you need to split a payment across multiple tax years or if you are paying on behalf of a business.
Understanding the cash advance trap
When your credit card company sees a payment to the IRS, it classifies it as a cash advance, not a purchase. This matters because cash advances have no grace period. Interest starts accruing the day the transaction posts, usually at a higher rate than your purchase APR. If your card charges 18% APR on purchases, it might charge 22% or more on cash advances.
Example: You pay $5,000 in taxes using a credit card. The processor charges $100 (2%). Your card company charges 22% APR on cash advances. If you pay off the $5,100 in one month, you owe roughly $93 in interest. If it takes three months, you owe roughly $280. The processing fee plus interest can easily exceed what you would owe on an IRS payment plan.
Check your card's terms before you pay. Some cards charge a cash advance fee on top of the interest — usually 3% to 5% of the amount. If yours does, add that to your total cost.
When a credit card payment makes financial sense
A credit card payment is worth considering if you earn rewards points and can pay off the balance quickly. If your card gives you 2% cash back on all purchases and you pay $5,000 in taxes, you earn $100 in rewards. The processor fee is roughly $100, so they cancel out — but you have earned points and spread the payment across a billing cycle. This only works if you can pay the full balance before interest kicks in.
Another scenario: you are short on cash this month but will have money next month. Paying by card lets you meet the tax important date now and pay the card off when your paycheck arrives. The interest for one month is usually less than the IRS failure-to-pay penalty (0.5% per month), so you come out ahead.
If neither of these applies — if you cannot pay off the card quickly or you do not earn enough rewards to offset the fee — look at an IRS payment plan instead. The IRS charges a setup fee (usually $31 to $225 depending on the plan type) and interest at the federal rate (currently around 8% annually), but there is no cash advance interest or processing fee.
Comparing credit card payments to other payment methods
| Payment Method | Upfront Cost | Interest Rate | When to Use |
|---|---|---|---|
| Credit card (via PayPal or 2nd Story) | 1.87%–2.35% processing fee | 18%–25%+ APR (cash advance rate) | You earn rewards and can pay off in one billing cycle |
| Debit card (via PayPal or 2nd Story) | 1.87%–2.35% processing fee | None | You have cash available now and want to avoid credit card interest |
| Bank transfer or ACH | None | None | You have a bank account and can wait 1–3 days for posting |
| IRS payment plan (Form 9465) | $31–$225 setup fee | ~8% annually (federal rate) | You cannot pay in full and need 3–72 months to pay |
| Check or money order | None | None | You prefer not to pay online |
What happens if you pay late or cannot pay in full
If your tax bill is overdue, the IRS charges a failure-to-pay penalty (0.5% per month) and interest (currently around 8% annually). A credit card payment stops the clock on the due date — once the processor confirms your payment, you are no longer late, even if the money has not posted to your IRS account yet. This can save you a few days of penalty and interest.
If you cannot pay the full amount, do not put the whole bill on a credit card hoping to pay it off later. Instead, contact the IRS about a payment plan. You can set up a short-term plan (120 days or less) with no setup fee, or a long-term installment agreement (up to 72 months) with a setup fee. Both cost less than credit card interest and cash advance fees combined, especially if you need more than a few months to pay.
Frequently Asked Questions
Can I deduct the credit card processing fee from my taxes?
No. The processing fee is a payment method cost, not a tax or a deductible business expense. You cannot write it off on your return, even if you are paying a business tax bill. The fee reduces your cash, but it does not reduce your tax liability.
What if the payment processor website is down or I cannot complete the payment?
Call the processor directly: PayPal at 1-844-729-4771 or 2nd Story at 1-855-729-1040. Both can process payments over the phone. If you are close to the important date and worried about missing it, you can also mail a check or use a bank transfer through IRS Direct Pay (which has no fee and posts within one business day).
Does paying by credit card hurt my credit score?
Yes, temporarily. The payment shows up as a cash advance, which increases your credit utilization ratio and may lower your score by a few points. The impact is usually small and temporary — your score recovers once you pay off the balance. However, if you cannot pay it off quickly, the interest and ongoing balance will hurt your score more over time.
Can I use a business credit card to pay my personal tax bill?
Technically yes, but your card company may flag it as unusual activity or decline it. The payment processor does not care whose card you use — it only checks that the card is valid and has available credit. However, your card issuer may see a large payment to a government agency and treat it as fraud. Call your card company first to let them know you are making this payment.
What if I want to pay my state taxes by credit card too?
Most states have their own payment processors and fee structures. Some states charge less than the IRS processors (as low as 1.5%), and some charge more. Go to your state tax agency website and look for "Pay Your Tax Bill" to see your options and the exact fee. Do not assume the IRS processors handle state taxes — they do not.