Let's talk about those pesky convenience fees when using TurboTax! It's a common point of confusion for many taxpayers, so you're not alone if you've wondered about them. While TurboTax itself doesn't typically charge a "convenience fee" for its software or e-filing services if you pay upfront, these fees often pop up when you're paying your actual tax bill to the IRS or your state using certain methods.
Think of it this way: TurboTax is helping you prepare and submit your return. Paying your tax liability is a separate transaction, and that's where third-party payment processors come into play, sometimes adding their own charges.
Navigating TurboTax and Convenience Fees: A Step-by-Step Guide
Here's a detailed breakdown to help you understand and potentially minimize convenience fees when using TurboTax:
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| How Much Is The Convenience Fee For Turbotax |
Step 1: Understand the Core Distinction - TurboTax Fees vs. Tax Payment Fees
Let's start with a crucial point right off the bat: Are you paying for TurboTax's service, or are you paying your actual tax bill? This is the most important distinction when it comes to convenience fees.
TurboTax Service Fees: These are the fees you pay to Intuit (the company behind TurboTax) for using their software or services (e.g., Deluxe, Premier, Self-Employed, or Live Assisted/Full Service). Generally, if you pay for these services with a credit card directly to TurboTax, there is no additional "convenience fee" for that transaction.
Tax Payment Fees: These are fees charged by third-party payment processors when you choose to pay your federal or state tax liability (the amount you owe the government) using certain methods, primarily credit or debit cards. TurboTax facilitates this payment, but the fee is levied by the payment processor, not directly by TurboTax.
Step 2: Identify When Convenience Fees Apply - Paying Your Tax Bill
The primary scenario where you'll encounter a convenience fee is when you opt to pay your federal or state tax liability using a credit or debit card through TurboTax (which then uses an IRS-approved or state-approved third-party payment processor).
Credit Card Payments to the IRS/States: If you owe the IRS or your state taxes and choose to pay by credit card when prompted within the TurboTax filing process, you will almost certainly be charged a convenience fee.
This fee is typically a percentage of the total amount you are paying, often ranging from 2.49% to 2.95%.
There might also be a minimum convenience fee, such as $3.95.
Why this fee? These third-party processors charge fees to cover the costs associated with credit card transactions. They are providing a service for the convenience of paying your taxes electronically with a card.
QuickTip: Slow down when you hit numbers or data.
Step 3: Explore Payment Options to Avoid or Minimize Fees
You have several avenues to pay your taxes, and some come without convenience fees:
Sub-heading 3.1: No-Fee Payment Methods
Direct Debit from Bank Account (ACH Transfer): This is often the most recommended and cost-effective way to pay your federal and state taxes if you owe money. When you file with TurboTax, you can provide your bank routing and account number, and the IRS/state will directly debit the amount from your account on a specified date. There is typically NO convenience fee for this method.
Check or Money Order: You can print out a payment voucher from TurboTax (or the IRS/state website) and mail a check or money order. This method is also free of convenience fees, though it requires more manual effort and mailing time.
IRS Direct Pay: For federal taxes, the IRS offers its own free service called IRS Direct Pay. You can schedule payments directly from your checking or savings account. While not directly integrated within the final payment step of TurboTax, you can choose to indicate in TurboTax that you will pay directly, then go to the IRS website to use this service.
Sub-heading 3.2: Fee-Associated Payment Methods
Credit Card (via TurboTax/Processor): As discussed, this incurs a convenience fee (e.g., 2.49% - 2.95% of your payment, with a minimum). While it's convenient and can help you earn credit card rewards, weigh the fee against the value of your rewards.
Debit Card (via TurboTax/Processor): While often lower than credit card fees, some payment processors still charge a flat fee (e.g., $2-$4) for debit card payments. It's usually a small fixed amount rather than a percentage.
Paying TurboTax Fees with Your Federal Refund: This is a distinct fee from the tax payment convenience fee. If you choose to have your TurboTax preparation fees deducted directly from your federal tax refund, there's an additional processing fee charged by a third-party bank that handles this transaction. This fee is typically around $40 (or $45 in California). This is a service fee for the convenience of not paying your TurboTax fees upfront, not a fee for paying your tax liability.
Step 4: Review Your Payment Selections Carefully
When you're nearing the end of the TurboTax filing process, specifically in the "File" section, you'll be presented with payment options for any taxes you owe.
Pay Close Attention to the Details: TurboTax is generally good about disclosing these fees before you finalize your payment. Look for text that states "convenience fee," "processing fee," or a percentage charge associated with credit/debit card payments.
Toggle Options: Experiment with different payment selections. If you select "pay with credit card," you'll see the associated fee. If you switch to "direct debit from bank account," you should see that fee disappear.
Don't Rush: This is a critical step. Take your time to review all the charges before you hit that final "file" or "submit payment" button.
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Step 5: Consider the Trade-offs
Tip: A slow skim is better than a rushed read.
Convenience vs. Cost: Paying by credit card is incredibly convenient, especially if you need to pay a large sum and want to avoid setting up a direct debit or mailing a check. However, the convenience comes at a cost.
Credit Card Rewards: For some, the credit card rewards (cash back, points, miles) earned from paying a large tax bill might outweigh the convenience fee. Do the math! If your card offers, say, 2% cash back, and the convenience fee is 2.49%, you're still losing money. If you have a high-value sign-up bonus or a card with a higher rewards rate for a specific category, it might be worth it, but be strategic.
Timing: If you're cutting it close to the tax deadline, paying by credit card can ensure your payment is processed on time. However, direct debit is also typically processed efficiently.
10 Related FAQ Questions
How to avoid the TurboTax convenience fee when paying my tax bill?
The best way to avoid the convenience fee for paying your tax bill is to select direct debit from your bank account (ACH transfer) or pay via check/money order. For federal taxes, you can also use IRS Direct Pay.
How to find out the exact convenience fee percentage for my tax payment?
When you select the credit or debit card payment option within TurboTax for your federal or state taxes, the exact percentage and any minimum fee will be clearly displayed on the payment screen before you finalize the transaction.
How to pay my TurboTax software fees without an extra charge?
You can pay for your TurboTax software/service fees using a credit or debit card directly to TurboTax during the checkout process. This payment method for the software itself typically does not incur an additional "convenience fee."
Tip: Reading in chunks improves focus.
How to remove the "Pay with My Refund" processing fee in TurboTax?
To avoid the $40 (or $45 in CA) processing fee for paying TurboTax's fees from your federal refund, you need to change your payment method to a credit or debit card before you file your return. This option is usually presented in the "File" section of the software.
How to know if my state charges a convenience fee for tax payments?
Most states follow a similar model to the IRS; if you pay your state tax liability by credit or debit card, a third-party processor will charge a fee. TurboTax will display this fee when you select the payment option for your state taxes. You can also check your state's official tax website for their specific payment options and fees.
How to pay federal taxes directly to the IRS without using TurboTax's payment system?
You can choose to indicate in TurboTax that you will pay your federal taxes directly. Then, go to the official IRS website and use their IRS Direct Pay service, which allows you to pay from your bank account for free.
How to determine if paying taxes with a credit card is worth the convenience fee?
Tip: Patience makes reading smoother.
Calculate the total convenience fee you'd pay and compare it to the value of the rewards (cash back, points, miles) you'd earn on your credit card. If the rewards value is higher than the fee, it might be worth it. Otherwise, a no-fee payment method is better.
How to switch my payment method in TurboTax if I already selected "Pay with My Refund"?
If your return is still in "pending" status or has been "rejected," you may be able to go back into the "File" section of TurboTax and change your payment method from "Pay with My Refund" to paying directly with a credit card. If your return has already been accepted, it's generally too late to change this option.
How to find my TurboTax service fees after filing?
You can usually review your TurboTax service fees by logging into your TurboTax account, navigating to your tax home, and looking for a "My Fees" or "Order Details" section.
How to ensure my tax payment is processed on time if I avoid convenience fees?
If you choose direct debit, ensure your bank account information is accurate and that you have sufficient funds. If mailing a check, send it well in advance of the deadline, preferably with tracking, to ensure it arrives on time.
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