Maximize Your Rewards: The Little-Known Pitfall In Paying Your Taxes By Credit Card

Tax day is right around the corner, and so is the year’s first quarterly Estimated Tax deadline of April 15th.

Many people pay their taxes due via credit card. It can be worth it for earning credit card initial bonuses, threshold spending bonuses and credit towards status, and for high rebate cards even just earning the spread between cost and reward value. E.g.

  • Pay1040.com charges 1.87% for credit card payments and a flat $2.50 for consumer debit card payments.
  • PayUSATax.com charges 1.82% for credit cards and $2.14 for debit.

Once wrinkle that isn’t usually mentioned by blogs and other sites talking about the opportunity to get something back for your tax payments is that the IRS publishes a limit of:

  • 2 payments per year for form 1040 tax due
  • 2 payments per quarter for form 1040-ES estimated taxes due

In practice I’ve never heard of anyone having problems making more than two payments. Each of the online payment services limits you to two payments, but you can make two apiece at OfficialPayments.com, PayUSATax.com, and Pay1040.com.

It turns out as far as I can tell that there is no penalty imposed for making more than two payments. Instead, the rule is published based on system constraints in the IRS’s Electronic Federal Tax Payment System.

For estimated taxes (Form 1040-ES), the system restricts to two payments per quarter if you’re using the same payment method and tax period. This limit is part of the EFTPS’s operational constraints to prevent duplicate payments and ‘system abuse,’ rather than a reflection of tax law regarding the frequency of estimated tax payments themselves.

If you make more than the allowed number of payments per quarter through EFTPS and exceed this operational limit, the additional payments might be rejected or require manual processing.

I haven’t heard of anyone getting their payments rejected, but it’s something to watch out for.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. And I’ve heard allegations that the companies selling online filing for individuals have pressured Congress not to make self-filing easier for the small payer. But the system is so screwed up anyway, thanks to the GOP cutting funding for the IRS, that getting anything straightened out here in a timely manner is an exercise in frustration.

  2. So what is the date cutoff for two payments? If I made 6 payments between 1/1/24 and 3/31/24 (two each company), can I make another six starting 4/1 or 4/16?

  3. I’ll need an Amex black card to pay mine this year. And drrichard, I saw an interview with one of the big tax prep companies and they said they are lobbying congress to minimize self reporting. As far as funding getting cut, that’s meaningless. As someone with a 60-70 page return every year (K-1s, investments and all the garbage that goes along with it) the system has been a mess for decades. They’ve been given money to straighten it out but nothing ever works. Look what happened to FAFSA this year.

  4. EFTPS payments r limited to 2 per day. I tried to pay my taxes due & schedule all 4 of my estimated tax payments, and it prevented me after the 2nd payment. Site said I could do 2 more the next day, and the day after, etc. Oh, but this was for payment via bank acct, not credit card payment. I don’t know if credit card payments are different.

  5. I use credit cards for this all the time. I have been prevented from making more than 2 payments using the same service. But, have always been able to make more payments using another service.

  6. @ drrichard. So you think the “GOP funding cuts” have “screwed” up the IRS? Hey try not reporting for a couple of years. My money says they aren’t “screwed up” at all. For an agency that processes 264+ tax returns a year I think they do a really good job and I don’t work for them.

  7. Read too many horror stories about paying through these companies. I’ll pass this year as it’s only a $90 benefit if I did. I’m sure it’ll be fine but the stories of something messing up and inability to get customer service isn’t worth it to me. Hope it goes well for all who try it!

  8. My taxes require several cards and payments since they are quite high. But it pushes me into tiers of spending that give me massive benefits for travel and perks. And, if need be, I can transfer a balance or two to yet another card, or cards, for 3% with 0% interest 1 year financing. Then use that money to make 10% somewhere else.

  9. The limit of 2 per payment type is per processor, not total. E.g., you can make 2 1040-ES payments EACH thru PayTaxUSA, Pay1040 and ACI Payments. I haven’t made 6 in one quarter but I’ve definitely made more than 2, with no problems

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