Primer on Paying Taxes With a Credit Card

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whodidntante
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Primer on Paying Taxes With a Credit Card

Post by whodidntante »

There seems to be some interest in this topic on the forum so I made a short primer.

What type of taxes can I pay with a credit card?
You can pay federal income taxes this way by doing estimated payments. You can generally pay state and local taxes this way also, including property tax. The fees may be higher for state and local taxes.

Why pay taxes with a credit card?
It can be a good way to complete the spending requirement needed for a new card bonus. Otherwise, you can earn a spread between the fee you are charged and the value of points earned. You also get float for the payment, which is at least as long as the grace period if you pay in full each month, or as long as 15 months if you pay with a card that also has an introductory purchase APR of 0% in addition to a new card bonus.

Can a working stiff (W-2 employee) do this?
Generally, yes. You can file W-4 with your employer to increase your number of allowances and reduce withholding, and then do equal quarterly estimated payments with a credit card to hit a safe harbor so you will not owe a penalty. If desired, you can also overpay your taxes by 5k each year and take the refund as paper I bonds. If you severely under withhold such as claiming you are exempt on a 400k income, it's possible that the IRS will order your employer to increase your withholding.

When are estimated payments due?
April 15, 2019
June 17, 2019
September 16, 2019
January 17, 2020
The deadlines vary by a couple of days each year but you can pay early if you don't want to look it up.

What are the fees for paying with a credit card?
For federal taxes you can find the fees for different processors here.
https://www.irs.gov/payments/pay-taxes- ... debit-card
As of March 2019, the lowest fee for a credit card is 1.87%, and $2 for a debit card (more on that later).

You'll have to search per state for income taxes and for your county/parish for property taxes. This resource might help for state taxes.
https://www.mastercard.us/en-us/consume ... state.html

You can also use Plastiq.com for a 2.5% fee but that is unlikely to be the best rate unless they are running a reduced fee promotion.

Is paying taxes with a credit card considered a cash advance?
No, it is considered a purchase.

Which cards should I consider for paying taxes this way?
The best deals will come along with a new card bonus, usually 10% of spend or more, and may include other benefits such as points. You may also get a purchase APR of 0% for up to 15 months. If you like, you can invest the money in other ways and pay off the balance before the 0% period ends.
https://www.doctorofcredit.com/best-cur ... n-bonuses/

You will sometimes have opportunities to use a 5% bonus category spend to pay taxes on the Chase Freedom or other 5% cards. I did this twice in 2018, for the Paypal 5% category, and for the drug store 5% category. I will do it again in April for the grocery store 5% category. The basic idea is you buy pre-paid $500 Visa or Mastercard debit cards at a store that qualifies under a bonus category. As an added benefit, debit cards also have a lower fee when you pay taxes with one. American Express pre-paid cards are never considered debit cards, however, so you should avoid those.

Some cards also have a high rate on general spend. Personally, I use these cards, if I’m being lazy and do not want to do one of the above, or if I don't have any better options at the moment.
Bank of America Preferred Rewards or Travel Rewards combined with Platinum Honors 2.625%
The Fidelity Rewards Visa card issued by Elan (US Bank). 2% all day or up to 2.8% spend with a targeted* offer.

*Elan sent me bonus spend offers in March 2018, August 2018, and November 2018, and February 2019 for example. I think it was three times in 2017 also. Each time the deal was an extra 2,000 points for a certain spend, and like I said before it worked out to about 2.8%.

A Boglehead reported that the USAA card does not give points for paying taxes. This is not a card I have.

Can I also pay taxes due with a credit card?
Yes, using the same processors mentioned above. Instead of doing an estimated payment, do a payment with request to file an extension, record the payment on your tax return, and then file. This is also a good thing to do if you are intentionally overpaying taxes to buy paper I bonds and/or to get an Amazon bonus.
Last edited by whodidntante on Sun Mar 24, 2019 7:12 pm, edited 1 time in total.
HomeStretch
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Re: Primer on Paying Taxes With a Credit Card

Post by HomeStretch »

Thank you, excellent post. I am going to try this.
Figuring_it_out
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Re: Primer on Paying Taxes With a Credit Card

Post by Figuring_it_out »

I have the USAA 2.5% silver card and had a sudden influx of cash last year that resulted in me owing ~14K federal. I paid that on the card and got the 2.5% rate. I was worried when I read (I think in here) that USAA does not allow tax payments but it worked for me. It also paid my local property municipal and school district taxes as well. all got the extra 1.5% "bonus".

There is language that if they detect that you are making special transactions to extract large bonus, your account activity will be reviewed and you could lose.... something. Either those particular bonuses or kicked from the bonus program altogether.

They don't offer the 2.5% cards anymore so it is somewhat valuable.
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

Figuring_it_out wrote: Sun Mar 24, 2019 5:45 pm I have the USAA 2.5% silver card and had a sudden influx of cash last year that resulted in me owing ~14K federal. I paid that on the card and got the 2.5% rate. I was worried when I read (I think in here) that USAA does not allow tax payments but it worked for me. It also paid my local property municipal and school district taxes as well. all got the extra 1.5% "bonus".

There is language that if they detect that you are making special transactions to extract large bonus, your account activity will be reviewed and you could lose.... something. Either those particular bonuses or kicked from the bonus program altogether.

They don't offer the 2.5% cards anymore so it is somewhat valuable.
Good to know, thanks.
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Re: Primer on Paying Taxes With a Credit Card

Post by HEDGEFUNDIE »

whodidntante wrote: Sun Mar 24, 2019 4:50 pm
Can I also pay taxes due with a credit card?
Yes, using the same processors mentioned above. Instead of doing an estimated payment, do a payment with request to file an extension, record the payment on your tax return, and then file.
You can make a straight up balance-due payment, no?

Why the need for an extension?
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Re: Primer on Paying Taxes With a Credit Card

Post by camillus »

whodidntante wrote: Sun Mar 24, 2019 4:50 pm You can file W-4 with your employer to increase your number of allowances and reduce withholding, and then do equal quarterly estimated payments with a credit card to hit a safe harbor so you will not owe a penalty.
If you do this, do you have to make 4 equal quarterly payments? Can I stop withholding via W4 and then begin to make quarterly payments mid year?

Is advocating "equalness" of the payments part of the requirement of safe harbor, or is it just advice from you, OP, on managing cash flow throughout the year? TY.
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

HEDGEFUNDIE wrote: Sun Mar 24, 2019 7:14 pm
whodidntante wrote: Sun Mar 24, 2019 4:50 pm
Can I also pay taxes due with a credit card?
Yes, using the same processors mentioned above. Instead of doing an estimated payment, do a payment with request to file an extension, record the payment on your tax return, and then file.
You can make a straight up balance-due payment, no?

Why the need for an extension?
Yes you can. It's no more work to do the extension payment, so that's what I have been doing.
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

camillus wrote: Sun Mar 24, 2019 8:04 pm
whodidntante wrote: Sun Mar 24, 2019 4:50 pm You can file W-4 with your employer to increase your number of allowances and reduce withholding, and then do equal quarterly estimated payments with a credit card to hit a safe harbor so you will not owe a penalty.
If you do this, do you have to make 4 equal quarterly payments? Can I stop withholding via W4 and then begin to make quarterly payments mid year?

Is advocating "equalness" of the payments part of the requirement of safe harbor, or is it just advice from you, OP, on managing cash flow throughout the year? TY.
It's not for cash flow reasons unfortunately.

The IRS will generally insist that you pay as you go. Taxes withheld are treated differently than estimated taxes. This page has more information.

https://www.irs.gov/taxtopics/tc306
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Re: Primer on Paying Taxes With a Credit Card

Post by kaneohe »

OP, thanks for posting this. Have you actually done this before and is it true that the only charges are the rates quoted?
Taxes are actually treated as purchases so no cash advance fees? I was excited about this concept until I tried to call Pay1040.com
to confirm some of these answers. Their Customer Service phone number appears to link to nothing different than the regular pay number.
There seems to be no way to talk to a real person. When I sent an e-mail asking about this, it was answered by another "machine" but it was hopeful because it gave another phone number purporting to be the real Customer Service number. It was different.......nothing resembling a pay site operation but it kept promising someone.......I gave up after 10 minutes.

My concern is that if something happens, there is great difficulty in getting it resolved since it is difficult to get a real person.

Have any experience in this area?
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Re: Primer on Paying Taxes With a Credit Card

Post by wxl31 »

kaneohe wrote: Sun Mar 24, 2019 10:48 pm OP, thanks for posting this. Have you actually done this before and is it true that the only charges are the rates quoted?
Done this, it works. If you are paranoid, set your cash advance limit to $0.
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

wxl31 wrote: Sun Mar 24, 2019 11:15 pm
kaneohe wrote: Sun Mar 24, 2019 10:48 pm OP, thanks for posting this. Have you actually done this before and is it true that the only charges are the rates quoted?
Done this, it works. If you are paranoid, set your cash advance limit to $0.
Seconded. I've paid taxes with a card several times and all transactions posted as a purchase. If seeing is believing, try a small transaction before committing to a larger one. You can do up to two estimated tax payment transactions per quarter per processor.
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Re: Primer on Paying Taxes With a Credit Card

Post by SCV_Lawyer »

I have not tried this before since I was using a 2% travel card (CapitalOne Venture) and so the 1.87% fee didn't provide much of a rate spread. But now I have the BofA Premium Rewards card with the 2.625% cash back. The problem is that my federal + state quarterly tax payment is about three times my credit limit. I will request an increase, but I doubt I can triple it, so alternatively, has anyone tried to make a partial payment, say 10 days before the tax due date, quickly pay it off, and then make a second payment before the tax due date?
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Re: Primer on Paying Taxes With a Credit Card

Post by JBTX »

whodidntante wrote: Sun Mar 24, 2019 9:00 pm
HEDGEFUNDIE wrote: Sun Mar 24, 2019 7:14 pm
whodidntante wrote: Sun Mar 24, 2019 4:50 pm
Can I also pay taxes due with a credit card?
Yes, using the same processors mentioned above. Instead of doing an estimated payment, do a payment with request to file an extension, record the payment on your tax return, and then file.
You can make a straight up balance-due payment, no?

Why the need for an extension?
Yes you can. It's no more work to do the extension payment, so that's what I have been doing.
This is all great info, but I'm still confused about the need or desire to do an "extension payment". Does the IRS direct pay site have an option to pay balance due?

I'll definitely do an est tax for Q1, my wife won sizeable chunk at casino.

Last year I paid $6000 property tax to get a $1000 bonus on a $10000 spend business card. Paying 2.3% fee is far less than 10% bonus.

I wish I had another card to do it with this year. I've run out of cards. Some of the est taxes will go on a marriot bonvoy card.
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Re: Primer on Paying Taxes With a Credit Card

Post by Voltron »

SCV_Lawyer wrote: Mon Mar 25, 2019 12:26 am I have not tried this before since I was using a 2% travel card (CapitalOne Venture) and so the 1.87% fee didn't provide much of a rate spread. But now I have the BofA Premium Rewards card with the 2.625% cash back. The problem is that my federal + state quarterly tax payment is about three times my credit limit. I will request an increase, but I doubt I can triple it, so alternatively, has anyone tried to make a partial payment, say 10 days before the tax due date, quickly pay it off, and then make a second payment before the tax due date?
Yes but start early. It’s a pain but still worth it for estimated federal and state taxes. I use Alliant Visa 2.5% cash back.
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Re: Primer on Paying Taxes With a Credit Card

Post by tfb »

whodidntante wrote: Sun Mar 24, 2019 4:50 pm For federal taxes you can find the fees for different processors here.
https://www.irs.gov/payments/pay-taxes- ... debit-card
Do you have to give your Social Security Number to the third-party processor? If filing jointly, do you have to give both SSNs to the third-party processor? Any security/id theft concerns?
Harry Sit, taking a break from the forums.
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Re: Primer on Paying Taxes With a Credit Card

Post by aristotelian »

SCV_Lawyer wrote: Mon Mar 25, 2019 12:26 am I have not tried this before since I was using a 2% travel card (CapitalOne Venture) and so the 1.87% fee didn't provide much of a rate spread. But now I have the BofA Premium Rewards card with the 2.625% cash back. The problem is that my federal + state quarterly tax payment is about three times my credit limit. I will request an increase, but I doubt I can triple it, so alternatively, has anyone tried to make a partial payment, say 10 days before the tax due date, quickly pay it off, and then make a second payment before the tax due date?
I have not done this but you could make your estimated payments on a monthly basis.
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Re: Primer on Paying Taxes With a Credit Card

Post by CulchaCity »

For credit card reward purposes are tax payments coded as online purchases?
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Re: Primer on Paying Taxes With a Credit Card

Post by ZinCO »

CulchaCity wrote: Mon Mar 25, 2019 9:00 am For credit card reward purposes are tax payments coded as online purchases?
I don't think so. Been doing this for 5 years with BoA cards to get 2.625%, tried last year on a quarterly payment using the ATT Access More card (3x on online purchases) but it only counted as 1x. But that's likely to be highly dependent on the card issuer as I think there is no general coding category for online purchases.
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Re: Primer on Paying Taxes With a Credit Card

Post by camillus »

SCV_Lawyer wrote: Mon Mar 25, 2019 12:26 am I have not tried this before since I was using a 2% travel card (CapitalOne Venture) and so the 1.87% fee didn't provide much of a rate spread. But now I have the BofA Premium Rewards card with the 2.625% cash back. The problem is that my federal + state quarterly tax payment is about three times my credit limit. I will request an increase, but I doubt I can triple it, so alternatively, has anyone tried to make a partial payment, say 10 days before the tax due date, quickly pay it off, and then make a second payment before the tax due date?
I'm drawing on my past experience with manufactured spending to say that this is possible. Make an estimated payment. Send payment to your credit card. Make another estimated payment, pay off credit card.

As long as different estimated payments are counted toward the same quarter, I think it would work. BOA may or may not be unhappy about this.

As was said in OP, the real upside is in using this "spending" to meet new signup bonus requirements. Your spread between 1.87 and 2.625 is 0.8%.

That's $80 for every $10,000 of quarterly estimated payments.
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

tfb wrote: Mon Mar 25, 2019 3:04 am
whodidntante wrote: Sun Mar 24, 2019 4:50 pm For federal taxes you can find the fees for different processors here.
https://www.irs.gov/payments/pay-taxes- ... debit-card
Do you have to give your Social Security Number to the third-party processor? If filing jointly, do you have to give both SSNs to the third-party processor? Any security/id theft concerns?
Your SSN is how the payment is unambiguously attributed to you in the simple system the IRS uses. If you forget your social security number, you can always look it up in the Equifax data breach. :twisted:
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

CulchaCity wrote: Mon Mar 25, 2019 9:00 am For credit card reward purposes are tax payments coded as online purchases?
No cards that I know of consistently treat tax payments as a bonus category, but you can sometimes use 5% bonus categories as noted above.
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Re: Primer on Paying Taxes With a Credit Card

Post by SCV_Lawyer »

camillus wrote: Mon Mar 25, 2019 9:21 am
SCV_Lawyer wrote: Mon Mar 25, 2019 12:26 am I have not tried this before since I was using a 2% travel card (CapitalOne Venture) and so the 1.87% fee didn't provide much of a rate spread. But now I have the BofA Premium Rewards card with the 2.625% cash back. The problem is that my federal + state quarterly tax payment is about three times my credit limit. I will request an increase, but I doubt I can triple it, so alternatively, has anyone tried to make a partial payment, say 10 days before the tax due date, quickly pay it off, and then make a second payment before the tax due date?
I'm drawing on my past experience with manufactured spending to say that this is possible. Make an estimated payment. Send payment to your credit card. Make another estimated payment, pay off credit card.

As long as different estimated payments are counted toward the same quarter, I think it would work. BOA may or may not be unhappy about this.

As was said in OP, the real upside is in using this "spending" to meet new signup bonus requirements. Your spread between 1.87 and 2.625 is 0.8%.

That's $80 for every $10,000 of quarterly estimated payments.
My federal quarterly payment is $68K. I just got my credit limit raised to $50K, so I just need to make two payments. Will earn me $2100 on the spread this year. State is not as good. CA charges 2.3%, so spread is only 0.325%, so that only nets me another $200 this year. I may just pay CA with check or ACH.
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Re: Primer on Paying Taxes With a Credit Card

Post by kaneohe »

Anyone know if you can check status of your payments at IRS via automated telephone? I think you can do it online but I prefer to use
the phone. I think you can also ask an IRS rep but you have to hold forever to reach someone.
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Re: Primer on Paying Taxes With a Credit Card

Post by Carini »

whodidntante wrote: Sun Mar 24, 2019 11:51 pm
wxl31 wrote: Sun Mar 24, 2019 11:15 pm
kaneohe wrote: Sun Mar 24, 2019 10:48 pm OP, thanks for posting this. Have you actually done this before and is it true that the only charges are the rates quoted?
Done this, it works. If you are paranoid, set your cash advance limit to $0.
Seconded. I've paid taxes with a card several times and all transactions posted as a purchase. If seeing is believing, try a small transaction before committing to a larger one. You can do up to two estimated tax payment transactions per quarter per processor.
Great post, thanks.

On the max estimated tax transactions per quarter, is this limitation imposed by the IRS? I clicked around a bit but couldn't find anything definitive on this at any of the IRS approved processor sites. Thanks again for the detailed info.
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

Carini wrote: Wed Mar 27, 2019 1:54 pm Great post, thanks.

On the max estimated tax transactions per quarter, is this limitation imposed by the IRS? I clicked around a bit but couldn't find anything definitive on this at any of the IRS approved processor sites. Thanks again for the detailed info.
I bumped into the limit when paying with $500 pre-paid Visa/Mastercards. I've also seen it posted somewhere. I don't remember where. YMMV. It's per processor, not an IRS limit of two payments.
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Re: Primer on Paying Taxes With a Credit Card

Post by mrk »

Have you submitted a payment with request to final an extension without actually filing the extension?

I am planning to make an excess payment this year for the purpose of buying I bonds. I was planning to file an extension, make the excess payment, and immediately file the return (as soon as the payment and extension are processed).

If I can do it without actually filing the extension, that would be better.
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

mrk wrote: Wed Mar 27, 2019 10:51 pm Have you submitted a payment with request to final an extension without actually filing the extension?

I am planning to make an excess payment this year for the purpose of buying I bonds. I was planning to file an extension, make the excess payment, and immediately file the return (as soon as the payment and extension are processed).

If I can do it without actually filing the extension, that would be better.
I've created some confusion with my comments on extension payments. I should have been more clear on a few points there.

- The extension payment with a credit card automatically grants the extension because your intent is crystal clear, and the first extension is granted without exception. There is no additional step needed.
- I normally do an extension payment so I then have flexibility to wait if I want, or if something goes wrong when filing. It's not otherwise needed in my situation.
- Yes, you can do a tax payment with a credit card that is not an extension payment.
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Re: Primer on Paying Taxes With a Credit Card

Post by Carini »

whodidntante wrote: Wed Mar 27, 2019 10:28 pm
Carini wrote: Wed Mar 27, 2019 1:54 pm Great post, thanks.

On the max estimated tax transactions per quarter, is this limitation imposed by the IRS? I clicked around a bit but couldn't find anything definitive on this at any of the IRS approved processor sites. Thanks again for the detailed info.
I bumped into the limit when paying with $500 pre-paid Visa/Mastercards. I've also seen it posted somewhere. I don't remember where. YMMV. It's per processor, not an IRS limit of two payments.
Got it, thanks. Also very timely since the 5% Chase bonus at CVS ends this weekend. Time to buy some pre-paid cards.
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Re: Primer on Paying Taxes With a Credit Card

Post by VictoriaF »

SCV_Lawyer wrote: Mon Mar 25, 2019 12:26 am I have not tried this before since I was using a 2% travel card (CapitalOne Venture) and so the 1.87% fee didn't provide much of a rate spread. But now I have the BofA Premium Rewards card with the 2.625% cash back. The problem is that my federal + state quarterly tax payment is about three times my credit limit. I will request an increase, but I doubt I can triple it, so alternatively, has anyone tried to make a partial payment, say 10 days before the tax due date, quickly pay it off, and then make a second payment before the tax due date?
Are your total taxes three times your CC limit, or your quarterly estimated taxes?

Here are some thoughts:
- You can make a payment several weeks in advance of the due date and have a longish turnaround with a margin for error.
- Your FED and State taxes are separate. You can use your CC maximum to pay one, pay off the CC, and then pay the other tax.
- I recall seeing that you can pay a specific tax with a credit card no more than one or two times. For example, you can use a CC on FED estimated tax for 1Q2019 once, for 2Q2019 once, etc.
- You can use a combination of CC and ACH payments. For example, you can use your CC maximum to pay your estimated 1Q2019 Federal tax and pay the remainder of the tax with the ACH from your bank.

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Re: Primer on Paying Taxes With a Credit Card

Post by FrugalProfessor »

This was a fascinating post. Thanks for the writeup.

For those interested, GoCurryCracker has a great blog post on the topic: https://www.gocurrycracker.com/pay-taxe ... edit-card/
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Re: Primer on Paying Taxes With a Credit Card

Post by ND Fan 1 »

If you want to meet some minumum spend of credit cards, you can "overpay" your taxes, then float the difference until you get your refund. I was already in line for a $1K refund based on W-4 withholdings. I have then made about $8K in payments to the IRS to knock out a couple of Min spend requirements. So my refund has increased to $9K. Getting ready to file this weekend, based on everything I have read, getting the refund should not be a problem. Fingers crossed.

For 2019 tax year, I have increased my W-4 holdings so I will owe in taxes and thus not have to overpay so much.
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Re: Primer on Paying Taxes With a Credit Card

Post by indexonlyplease »

This year I went online to pay my taxes owed which was $4500.00. After I put in the information I found the fee was I believe $86.00. I cancelled and send the check in the mail.
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Re: Primer on Paying Taxes With a Credit Card

Post by AtlasShrugged? »

whodidntante...Great post! I use my Fidelity Visa card and get 2% of my balance dumped into my Roth. And yes, I try to time the payment with a bonus offer, so that dumps even a little more into the Roth.

I've noticed that not very many people in my social circle use CCs to pay their tax debt.
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Re: Primer on Paying Taxes With a Credit Card

Post by SlowMovingInvestor »

AtlasShrugged? wrote: Sat Mar 30, 2019 7:13 am whodidntante...Great post! I use my Fidelity Visa card and get 2% of my balance dumped into my Roth. And yes, I try to time the payment with a bonus offer, so that dumps even a little more into the Roth.
But that should count as a contribution, even if Fidelity doesn't report it as one. After all, there is no difference between taking the bonus in cash and depositing it, and directly asking Fidelity to deposit it.

This is different from getting a bonus for a Roth move that is deposited into the Roth -- that does not count as a contribution because it's linked to the Roth and is no different from getting a better rate on an account inside a Roth.
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Re: Primer on Paying Taxes With a Credit Card

Post by arf30 »

I got the targeted Fidelity Visa offer last month and decided to pay federal tax with it for the first time (roughly 9k). Gives me an extra month to float the tax payment and I should earn a small amount in CC rewards.
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Re: Primer on Paying Taxes With a Credit Card

Post by JD Leonard »

I've been using pay1040.com for years to make estimated payments.

An Amex Business Platinum card earns 1.5 points/$ spent on individual purchases that are over $5k.

An Amex Blue Business Plus card earns 2 points/$ on up to $50k/yr.

An Amex Everyday Preferred card earns 1.5 points/$ in billing months in which you make at least 30 purchases.

I value Amex points at a minimum of $0.02/ea (I transfer them to airlines where I make high value redemptions) so the spread above the 1.87% fee can be significant.

Even more to be gained from application bonuses.
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CT-Scott
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Re: Primer on Paying Taxes With a Credit Card

Post by CT-Scott »

I'm finishing up my annual taxes with the H&R Block software, and I have to pay a good chunk of money. The H&R Block app is giving me its options for payment, and the fine print on paying via credit card is a 2.49% fee. It looks like they use Pay1040 as their back-end processor, so H&R Block must be pocketing part of it, since the Pay1040 website indicates that they charge 1.87%.

How can I complete/file my taxes through the H&R Block software, but pay separately through the Pay1040.com website? Would I choose the "Mail a check" option?
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Re: Primer on Paying Taxes With a Credit Card

Post by sabtastic »

Just ran into this by accident and wanted to say thank you.
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Re: Primer on Paying Taxes With a Credit Card

Post by JD Leonard »

CT-Scott wrote: Sun Apr 07, 2019 11:35 am I'm finishing up my annual taxes with the H&R Block software, and I have to pay a good chunk of money. The H&R Block app is giving me its options for payment, and the fine print on paying via credit card is a 2.49% fee. It looks like they use Pay1040 as their back-end processor, so H&R Block must be pocketing part of it, since the Pay1040 website indicates that they charge 1.87%.

How can I complete/file my taxes through the H&R Block software, but pay separately through the Pay1040.com website? Would I choose the "Mail a check" option?
I run a company in the payment processing space. They're almost certainly pocketing the difference.

The IRS doesn't care whether you mail a check or use one of the authorized credit card payment services. The "Mail a check" option would better be described as Pay the IRS without H&R Block's "help". That's what you want.
Last edited by JD Leonard on Sun Apr 07, 2019 12:46 pm, edited 1 time in total.
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Re: Primer on Paying Taxes With a Credit Card

Post by CT-Scott »

JD Leonard wrote: Sun Apr 07, 2019 12:30 pmI run a company in the payment processing space. They're almost certainly pocketing the difference.

The IRS didn't care whether you mail a check or use one of the authorized credit card payment services. The "Mail a check" option would better be described as Pay the IRS without H&R Block's "help". That's what you want.
Thanks for the quick reply. I actually decided to go through the steps of choosing to "pay by credit card" in the H&R Block software to see what happens. Here's what I found...

After getting the confirmation that my tax forms were accepted, I clicked on the 'Next' button in the H&R Block software and it gave me a checklist. One of the items was to go to this website to make my credit card payment:
http://www.hrblock.com/software/2018/pa ... redit_card
* don't click on this - see below

When I paste that URL into my browser, it appears to redirect me to an H&R Block-branded pay1040.com page. The form looks identical to the form I see if I go here:
https://www.pay1040.com/MakeAPayment?pr ... y=Personal

Interestingly, if I now go to that URL, I see the H&R Block logo in the upper left, so it must be using cookies. Nevertheless, if I clear the cookies (or use a different browser), I'll see the Pay1040 logo in the upper left. Again, the form itself is identical.

So, as you said JD, I'm thinking that I should be able to just go Pay1040.com directly, and pay my taxes through them at 1.87%.
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Re: Primer on Paying Taxes With a Credit Card

Post by Willmunny »

If you use pay1040.com to make the credit card payment for quarterly estimated taxees, do you still need to mail in a paper Form 1040-ES? Thanks!
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Re: Primer on Paying Taxes With a Credit Card

Post by dual »

whodidntante wrote: Wed Mar 27, 2019 10:28 pm
Carini wrote: Wed Mar 27, 2019 1:54 pm On the max estimated tax transactions per quarter, is this limitation imposed by the IRS?
I bumped into the limit when paying with $500 pre-paid Visa/Mastercards. I've also seen it posted somewhere. I don't remember where. YMMV. It's per processor, not an IRS limit of two payments.
The 2 payments per quarter is an IRS rule:
https://www.irs.gov/payments/frequency- ... ax-payment

Comment: whodidntante thanks for the post. Great info.

It's on topics like this that this website needs a wiki type summary post as there is also great information in individual posts. I suppose some enterprising Boglehead could put the info on the website wiki :D
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Re: Primer on Paying Taxes With a Credit Card

Post by dual »

CT-Scott wrote: Sun Apr 07, 2019 11:35 am How can I complete/file my taxes through the H&R Block software, but pay separately through the Pay1040.com website? Would I choose the "Mail a check" option?
See the OP. Pay the amount due on Pay1040.com as a payment with extension to file (accepted automatically for 1.87% fee). Then go back to your H&R Block and enter the payment as an additional payment. You can then e-file with 0 balance due.

Note: this works for ttax-not sure about HRBlock.
Last edited by dual on Sun Apr 07, 2019 1:51 pm, edited 1 time in total.
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Re: Primer on Paying Taxes With a Credit Card

Post by JD Leonard »

dual wrote: Sun Apr 07, 2019 1:21 pm The 2 payments per quarter is an IRS rule:
https://www.irs.gov/payments/frequency- ... ax-payment
From https://frequentmiler.boardingarea.com/ ... 8-edition/
In my experience, these limits are enforced per payment processing company. That means that you can really make up to 6 payments per tax period per type of tax payment. An IRS advisor I spoke with several years ago did not think that there would be any problem with making more than 2 payments by using different processors. Since then, I have made more than 2 payments per tax period many times and never had any issues. That is, of course, just my own personal experience. I can’t guarantee that your outcome would be the same.
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Re: Primer on Paying Taxes With a Credit Card

Post by CT-Scott »

dual wrote: Sun Apr 07, 2019 1:40 pm See the OP. Pay the amount due on Pay1040.com as a payment with extension to file (accepted automatically for 1.87% fee). Then go back to your H&R Block and enter the payment as an additional payment. You can then e-file with 0 balance due.

Note: this works for ttax-not sure about HRBlock.
I'm confused about the need to use "payment with extension to file." I already e-filed with the H&R Block software (and received confirmation that it was successfully approved (or whatever terminology they used) by the Feds). So now I just have to make the actual payment. It seems like I should be "done" with H&R Block now, and should be able to just use Pay1040.com to submit the actual payment.
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Re: Primer on Paying Taxes With a Credit Card

Post by snowman »

CT-Scott wrote: Sun Apr 07, 2019 3:48 pm
dual wrote: Sun Apr 07, 2019 1:40 pm See the OP. Pay the amount due on Pay1040.com as a payment with extension to file (accepted automatically for 1.87% fee). Then go back to your H&R Block and enter the payment as an additional payment. You can then e-file with 0 balance due.

Note: this works for ttax-not sure about HRBlock.
I'm confused about the need to use "payment with extension to file." I already e-filed with the H&R Block software (and received confirmation that it was successfully approved (or whatever terminology they used) by the Feds). So now I just have to make the actual payment. It seems like I should be "done" with H&R Block now, and should be able to just use Pay1040.com to submit the actual payment.
I have never done this, but I am intrigued by the concept and will defer to OP to clarify. I am contemplating doing the same, though I have not filed taxes yet. According to this "2019 Edition" https://frequentmiler.boardingarea.com/ ... 9-edition/, you are on the right track:

"Paying end of year taxes: Tell your tax preparer or tax software that you’ll pay via check. Then, browse to the appropriate tax payment site (e.g. Pay1040.com, OfficialPayments.com, or PayUSAtax.com) to pay your taxes. There is no need to mail in the 1040V payment voucher."
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Re: Primer on Paying Taxes With a Credit Card

Post by dual »

CT-Scott wrote: Sun Apr 07, 2019 3:48 pm I'm confused about the need to use "payment with extension to file." I already e-filed with the H&R Block software (and received confirmation that it was successfully approved (or whatever terminology they used) by the Feds).
Ah, I see. Did not know you had already filed.

I am not OP but I think the pay-with-extension method before filing pushes the IRS to look for and apply the credit card payment. If you have already filed then paying by credit card anyway makes sense. I will leave it up to you whether to send in the 1040-V. If the IRS complains, you can always submit a copy of the credit card confirmation with the confirmation number.
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Re: Primer on Paying Taxes With a Credit Card

Post by CT-Scott »

dual wrote: Sun Apr 07, 2019 5:19 pm Ah, I see. Did not know you had already filed.

I am not OP but I think the pay-with-extension method before filing pushes the IRS to look for and apply the credit card payment. If you have already filed then paying by credit card anyway makes sense. I will leave it up to you whether to send in the 1040-V. If the IRS complains, you can always submit a copy of the credit card confirmation with the confirmation number.
Actually, this was useful info. I just opened up the PDF I saved of my full tax forms that were submitted by H&R Block. It included a 1040-V. My guess is that when you select "Pay with credit card" (or pay by check) that it triggers H&R Block to include this form, since they know that the payment will arrive sometime after the forms have already been electronically submitted/accepted.
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Re: Primer on Paying Taxes With a Credit Card

Post by Willmunny »

Willmunny wrote: Sun Apr 07, 2019 1:08 pm If you use pay1040.com to make the credit card payment for quarterly estimated taxees, do you still need to mail in a paper Form 1040-ES? Thanks!
This thread has been very helpful. I just wanted to bump this question as I am unclear. Thanks
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Re: Primer on Paying Taxes With a Credit Card

Post by kaneohe »

Willmunny wrote: Sun Apr 07, 2019 8:08 pm
Willmunny wrote: Sun Apr 07, 2019 1:08 pm If you use pay1040.com to make the credit card payment for quarterly estimated taxees, do you still need to mail in a paper Form 1040-ES? Thanks!
This thread has been very helpful. I just wanted to bump this question as I am unclear. Thanks
First time doing it so I don't really know. When you pay, they ask if it is for balance due or estimated taxes. You have to choose 1 or
the other so I would think the payment is accompanied by the same info which would make making in the paper form redundant.
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