Navigating the world of taxes can be a real head-scratcher, especially when it comes to payment options. One question that frequently pops up is: How much does TurboTax charge to pay taxes with a credit card? This seemingly simple question has a few layers to it, and understanding them is key to making an informed decision.
So, are you ready to unravel the mystery of credit card payment fees with TurboTax? Let's dive in!
Understanding the "Why" Behind the Fees
Before we get to the numbers, it's important to understand why there are fees associated with paying your taxes by credit card, regardless of whether you're using TurboTax or another method.
Credit card companies charge merchants (in this case, the payment processors handling your tax payment) a fee for every transaction. Since the IRS and state tax authorities want to receive the full amount of tax owed, they don't absorb these processing fees. Instead, they pass them on to the taxpayer in the form of a "convenience fee."
Think of it this way: When you use your credit card at a grocery store, the store usually pays the processing fee. But for tax payments, the government essentially says, "We'll take the full tax amount, and you, the taxpayer, cover the cost of using your credit card."
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| How Much Does Turbotax Charge To Pay Taxes With Credit Card |
Step 1: Differentiating Between TurboTax Fees and Tax Payment Fees
This is crucial and often a source of confusion. When you use TurboTax, you might encounter two distinct types of fees:
Sub-heading: TurboTax Software/Filing Fees
What it is: This is the cost you pay to TurboTax for using their software to prepare and file your tax return. This fee varies depending on the TurboTax product you choose (e.g., Free Edition, Deluxe, Premier, Self-Employed) and any additional services you opt for (like audit defense).
How you pay for it: You can typically pay for your TurboTax software and filing fees with a credit card without an additional processing fee from TurboTax itself. TurboTax accepts major credit and debit cards for these charges.
Important Note: Some users choose to pay their TurboTax fees directly from their federal tax refund. Be aware that this option usually incurs an additional processing fee (often around $40-$45) charged by a third-party bank that facilitates this service.
Sub-heading: Tax Payment Convenience Fees
What it is: This is the fee charged by the payment processor when you elect to pay your actual federal or state tax liability (the amount of tax you owe to the government) using a credit card. TurboTax integrates with these approved payment processors to allow you to make this payment directly through their platform.
Who charges it: Not TurboTax directly, but the third-party payment processor that handles the transaction between you and the IRS/state tax authority. TurboTax simply facilitates the connection to these processors.
The Big Reveal: As of recent information, if you pay your taxes with a credit card through TurboTax's integrated payment system, you can expect a convenience fee of approximately 2.49% of the total amount you owe. There might also be a minimum fee (e.g., $3.95).
QuickTip: Read line by line if it’s complex.
Step 2: Understanding the Specific Charge for Tax Payments via Credit Card
Now let's get to the specifics of paying your actual tax bill with a credit card through TurboTax.
Sub-heading: The Percentage Breakdown
Federal Taxes: When you're paying your federal tax liability with a credit card through TurboTax, the fee is generally 2.49% of the amount you are paying.
State Taxes: The convenience fee for state tax payments can vary. While some states might have similar fees to federal, it's essential to check your specific state's tax payment portal or TurboTax's information for your state as these rates can differ. However, in many cases, it will be in a similar range to the federal fee.
Minimum Fee: Always be aware that there might be a minimum convenience fee, which means if your tax bill is very small, the percentage might translate to less than the minimum, and you'll still pay the minimum amount.
Sub-heading: Who are the Payment Processors?
When you choose to pay your taxes with a credit card through TurboTax, TurboTax partners with IRS-authorized payment processors like Link2Gov LLC or ACI Payments, Inc. These are the entities that actually charge you the convenience fee, not Intuit (the maker of TurboTax) directly for the tax payment itself.
Step 3: Weighing the Pros and Cons of Paying Taxes with a Credit Card
Paying taxes with a credit card isn't always the best option, even with the convenience. Here's a balanced view:
Sub-heading: Advantages
Convenience: It's undoubtedly easy to pay your taxes online with a few clicks, especially if you're already in the TurboTax platform.
Earning Rewards: This is a primary driver for many. If you have a rewards credit card, a large tax payment can help you:
Meet a sign-up bonus: Many credit cards offer substantial bonuses for meeting a certain spending threshold within the first few months. A tax payment can easily help you reach this.
Earn points/miles/cash back: Even without a sign-up bonus, you'll earn rewards on the amount paid (before the fee).
Achieve spending tiers: Some cards offer increased benefits or status levels after a certain amount of annual spending.
Delaying Payment: If you need a little more time to gather funds, paying with a credit card effectively gives you until your credit card statement due date to pay off the balance without incurring interest (if you pay in full). However, this is only advisable if you can pay the credit card bill in full to avoid high interest charges.
Avoiding Penalties: If you're short on cash and the tax deadline is looming, paying with a credit card can help you avoid costly IRS late payment penalties and interest. This can sometimes be cheaper than the penalties.
Sub-heading: Disadvantages
QuickTip: Skim first, then reread for depth.
The Convenience Fee: This is the biggest drawback. The 2.49% fee (or similar) can quickly add up, significantly eating into any rewards you might earn. For a $10,000 tax bill, that's $249 in fees!
High Interest Rates: If you can't pay off your credit card balance in full, the interest you accrue will almost certainly far outweigh any rewards you earned and make the overall cost of paying your taxes much higher. Credit card interest rates are typically much higher than IRS penalties for underpayment.
Impact on Credit Score: Carrying a large balance, especially close to your credit limit, can negatively impact your credit utilization ratio and potentially lower your credit score.
Limited Payments: The IRS generally limits the number of credit card payments you can make for a single tax period.
Step 4: Making an Informed Decision
Given the fees, when does it make sense to pay your taxes with a credit card through TurboTax?
Sub-heading: When it Might Make Sense
To hit a significant credit card sign-up bonus: If the value of the bonus substantially exceeds the convenience fee. Calculate this carefully!
To meet a spending threshold for a valuable perk: Such as an annual free night certificate for a hotel or a companion pass on an airline.
As a last resort to avoid IRS penalties: If you absolutely cannot pay your taxes by the deadline through other means and the credit card fee is less than the potential IRS penalties and interest.
If your credit card offers an unusually high rewards rate on all purchases that still makes it worthwhile after the fee (e.g., a 3% or 4% cash back card, which is rare for general spending).
Sub-heading: When it Probably Doesn't Make Sense
If you're simply trying to earn basic rewards (e.g., 1% or 1.5% cash back). The fee will almost always negate these earnings.
If you cannot pay off the credit card balance in full by the due date. The interest will be far more costly.
If you have other, cheaper payment options available (like direct debit from your bank account).
Step 5: How to Pay Your Taxes with a Credit Card Using TurboTax (Step-by-Step)
If you've decided that paying with a credit card is the right choice for your situation, here's a general guide on how you'd proceed within TurboTax:
Complete Your Return: First and foremost, you need to complete your federal and state tax returns in TurboTax and ensure all your information is accurate.
Review Your "Amount Due": Once your return is finalized, TurboTax will clearly show you if you owe any federal or state taxes.
Navigate to the "File" Section: In TurboTax, you'll typically move to the "File" section or a similar step where you choose your filing and payment methods.
Select Payment Method: When presented with payment options, you will see choices like "Direct Debit from Bank Account," "Mail a Check," and "Pay with Credit Card." Select "Pay with Credit Card."
Be Aware of the Disclosure: TurboTax will clearly display information about the convenience fee charged by the third-party payment processor. Read this carefully! It will tell you the percentage and any minimum fee.
Redirect to Payment Processor: TurboTax will then typically redirect you to a secure portal of one of the IRS-authorized payment processors (like Link2Gov or ACI Payments).
Enter Credit Card Information: On the processor's site, you will enter your credit card details (card number, expiration date, security code, billing address).
Confirm Payment: Review all the details, including the tax amount and the convenience fee, before confirming your payment.
Receive Confirmation: You should receive a confirmation number from the payment processor once the transaction is successful. Keep this for your records! TurboTax will also likely show a confirmation of your filing and payment method.
FAQs: How to...
Here are 10 related FAQ questions to help you further understand paying taxes with a credit card:
Tip: Focus on sections most relevant to you.
How to avoid the convenience fee when paying taxes?
To avoid the convenience fee, you can pay your taxes via direct debit from your bank account (ACH), mail a check or money order, or use electronic funds withdrawal during e-filing if available. These methods typically do not incur additional fees.
How to know if paying taxes with a credit card is worth it for rewards?
Calculate the value of the rewards you'll earn (e.g., cash back, miles, points) and subtract the credit card convenience fee. If the net value of the rewards is positive and significant enough for you, it might be worth it. Pay close attention to sign-up bonuses that offer substantial rewards for meeting spending thresholds.
How to pay my TurboTax filing fees without a credit card?
You can typically pay your TurboTax filing fees by opting to have them deducted from your federal tax refund. Be aware, however, that this option usually incurs an additional processing fee (often around $40-$45) charged by a third-party bank.
How to find the exact convenience fee for my state taxes when using a credit card?
When you reach the payment section in TurboTax, the exact fee for your state tax payment will be displayed before you finalize the transaction. You can also visit your specific state's official tax website for payment options and associated fees.
How to ensure my credit card payment for taxes goes through correctly?
Double-check all credit card details, including the number, expiration date, and security code. Ensure your billing address matches the one on file with your credit card company. Keep a record of the confirmation number provided by the payment processor.
QuickTip: Skim slowly, read deeply.
How to pay my taxes with multiple credit cards?
Generally, the IRS allows for multiple payments for a tax liability. However, through integrated tax software like TurboTax, you might be limited to one payment per filing. If you need to use multiple cards, you may need to make separate payments directly through IRS-authorized payment processors outside of TurboTax, or through the IRS Direct Pay system.
How to avoid interest charges when paying taxes with a credit card?
To avoid interest charges, you must pay off the entire credit card balance that includes your tax payment by its due date. If you cannot do this, the high interest rates will likely negate any rewards earned and make it a very expensive way to pay your taxes.
How to get a payment extension if I can't pay my taxes on time?
You can request a payment extension from the IRS (and often your state) even if you can't pay the full amount due. This generally gives you more time to pay, though interest and penalties may still apply. Paying a portion of your tax owed with a credit card can also act as an extension in some cases.
How to contact the payment processor if I have issues with my credit card tax payment?
The payment processor (e.g., Link2Gov, ACI Payments, Inc.) will typically have their contact information available on their website or on the payment confirmation screen/email. TurboTax support can also guide you to the correct contact.
How to check if my credit card tax payment was received by the IRS?
You can typically check the status of your federal tax payment on the IRS "Check Your Payment Status" tool on their website a few days after making the payment. For state taxes, check your state's tax authority website or contact them directly.
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