Primer on Paying Taxes With a Credit Card

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JD Leonard
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Re: Primer on Paying Taxes With a Credit Card

Post by JD Leonard »

I use pay1040.com to pay quarterly estimated taxes. There is no need to mail in anything 8-)
- JD Leonard
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whodidntante
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

Just paid Q1 estimated taxes for my state and federal income taxes with a credit card. As JD Leonard commented already, it is not necessary to mail anything in after paying estimated taxes with a credit card.
GTBuzz
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Re: Primer on Paying Taxes With a Credit Card

Post by GTBuzz »

Hello,

I am attempting to make a 2019-ES Estimated Tax Payment through Plastiq under a 1% fee promo with my 2.625% cash back BoA Premium Rewards card. When I go through Plastiq's https://www.plastiq.com/us-taxes/ link, the payment recipient address pre-populates as the Austin, TX IRS service center (but only takes 3 business days, so maybe it really is an electronic payment?). However, Form 1040-ES instructions clearly say for my state that payments should be sent to the Charlotte, NC IRS service center. I can manually enter that address as a recipient, but then the payment does not allow me to specify SSN, Tax Type & Year, etc., just the traditional Memo / Account Number options.

Should I be concerned that Plastiq is defaulting tax payments to the Austin service center, even though the IRS seems to say that this address should only be used if you are not enclosing a payment?

Thanks in advance for any thoughts.
kaneohe
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Re: Primer on Paying Taxes With a Credit Card

Post by kaneohe »

kaneohe wrote: Sun Apr 07, 2019 8:16 pm
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.
I just paid w/ pay1040 (automated phone) and , unless I'm imagining things, I believe it said not to send any forms in.

One useful thing may be to check your statement period closing date vs your tax payment date. If you can move your statement period closing date so it is just before your tax payment date, you may be able to defer your cc payment date an extra 3-4 wks. If you are using a 2% rewards card, and you can earn 2% in your savings account, you may be able to nearly double your return. Of course the credit card reward is not taxable but the extra interest you earn on the float is.
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whodidntante
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

GTBuzz wrote: Sat Sep 14, 2019 10:33 am Hello,

I am attempting to make a 2019-ES Estimated Tax Payment through Plastiq under a 1% fee promo with my 2.625% cash back BoA Premium Rewards card. When I go through Plastiq's https://www.plastiq.com/us-taxes/ link, the payment recipient address pre-populates as the Austin, TX IRS service center (but only takes 3 business days, so maybe it really is an electronic payment?). However, Form 1040-ES instructions clearly say for my state that payments should be sent to the Charlotte, NC IRS service center. I can manually enter that address as a recipient, but then the payment does not allow me to specify SSN, Tax Type & Year, etc., just the traditional Memo / Account Number options.

Should I be concerned that Plastiq is defaulting tax payments to the Austin service center, even though the IRS seems to say that this address should only be used if you are not enclosing a payment?

Thanks in advance for any thoughts.
Plastiq payments by check take about 8 days, so your guess that they are handling this electronically is a good one I think. I don't know what would happen if a tax payment were mailed to an IRS address other than the one specified in the instructions. My guess is things would be fine.
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

Chase Freedom has Paypal as a 5% bonus category starting October 1st. There is one processor who accepts Paypal, PayUSATax. I'll be paying the first $1,500 of my estimated tax like that. Pretty nice margin.
MisterBill
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Re: Primer on Paying Taxes With a Credit Card

Post by MisterBill »

whodidntante wrote: Sun Sep 15, 2019 1:31 pm Chase Freedom has Paypal as a 5% bonus category starting October 1st. There is one processor who accepts Paypal, PayUSATax. I'll be paying the first $1,500 of my estimated tax like that. Pretty nice margin.
Thanks for mentioning this! Paypal was a 5% category on DIscover this quarter. I had one card that I had not used it on so I just paid $1471.17 of my taxes on that (came out to $1500 with the fee). I normally use Pay1040 with my BofA 2.625% card and will use them for the remainder of the amount owed.

For 4q I have 3 Chase Freedom cards that I can use!
Last edited by MisterBill on Mon Sep 16, 2019 7:15 pm, edited 1 time in total.
boglenomics
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Re: Primer on Paying Taxes With a Credit Card

Post by boglenomics »

whodidntante wrote: Sun Sep 15, 2019 1:31 pm Chase Freedom has Paypal as a 5% bonus category starting October 1st. There is one processor who accepts Paypal, PayUSATax. I'll be paying the first $1,500 of my estimated tax like that. Pretty nice margin.
This concept is great thanks for sharing! I have to pay quarterly taxes for my business and have the Chase Freedom and the CSR. So I can transfer those points to the CSR and redeem at a 7.5% rate for my travel needs :D
Leesbro63
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Re: Primer on Paying Taxes With a Credit Card

Post by Leesbro63 »

I just used Pay1040.com for the first time with my BofA 2.62% card. My concern is that big tax payments get posted to and by the IRS correctly. If I find out next summer that the IRS didn’t get a 2019 estimated tax payment that I assumed it did (after filing on Apr 15), wont it be too late to ask the credit card to reverse the payment or be my advocate?

I actually called the IRS to confirm receipt. They finally did, but what a major hassle to get a live person and to get my ID verified so they would give me the info. Anyone else concerned about “failure of the middle-man”. At $70 per $10,000 in tax (difference between 1040x.com fee and my 2,62% credit card rebate), I’m not sure the risk of some sort of posting failure is worth it. The risk is low but the cost and/or hassle is high.
kaneohe
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Re: Primer on Paying Taxes With a Credit Card

Post by kaneohe »

Leesbro63 wrote: Tue Sep 17, 2019 5:42 am I just used Pay1040.com for the first time with my BofA 2.62% card. My concern is that big tax payments get posted to and by the IRS correctly. If I find out next summer that the IRS didn’t get a 2019 estimated tax payment that I assumed it did (after filing on Apr 15), wont it be too late to ask the credit card to reverse the payment or be my advocate?

I actually called the IRS to confirm receipt. They finally did, but what a major hassle to get a live person and to get my ID verified so they would give me the info. Anyone else concerned about “failure of the middle-man”. At $70 per $10,000 in tax (difference between 1040x.com fee and my 2,62% credit card rebate), I’m not sure the risk of some sort of posting failure is worth it. The risk is low but the cost and/or hassle is high.
I share your concerns and have done what you have done to confirm w/ IRS.........due for next checkup end of this wk. Both previous times have checked out ok .....had to wait on phone a bit but I don't remember it being that painful. Wonder if cc company would help if a problem occurred. You might want to ask about being able to check your IRS acct online. I would hope that these are IRS approved vendors and that would account for something if anything went wrong.
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Re: Primer on Paying Taxes With a Credit Card

Post by james_madison »

I apologize if these are basic questions, but having just come across this thread this weekend, I've been trying to make sure I understand how it may apply to my scenario.

Currently: Married and filing jointly (MFJ), itemize on our 1040, both with W-2 jobs. We have our employers withhold extra each pay period since we're a dual income household -- roughly $1k a month extra combined.

Q1: I'd like to use up my $1500 in paypal Chase Freedom (5% category) rewards, but will the IRS have issues if I just make one payment in the year?

Q2: Would the same be true as in Q1, if I wanted to overpay in December only to purchase $5k in paper I Bonds?

Q3: Could I next year set my extra withholdings to $0, and then pay the IRS twice a year (June & December) $6k each time? I say twice a year since that's the limit given by the credit card processors on a 1040 form submission. In contrast to the estimated taxes of 4 equal quarterly payments.

I'm just trying to make sure I understand this, since IRS is a four letter word to me.
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

Leesbro63 wrote: Tue Sep 17, 2019 5:42 am I just used Pay1040.com for the first time with my BofA 2.62% card. My concern is that big tax payments get posted to and by the IRS correctly. If I find out next summer that the IRS didn’t get a 2019 estimated tax payment that I assumed it did (after filing on Apr 15), wont it be too late to ask the credit card to reverse the payment or be my advocate?

I actually called the IRS to confirm receipt. They finally did, but what a major hassle to get a live person and to get my ID verified so they would give me the info. Anyone else concerned about “failure of the middle-man”. At $70 per $10,000 in tax (difference between 1040x.com fee and my 2,62% credit card rebate), I’m not sure the risk of some sort of posting failure is worth it. The risk is low but the cost and/or hassle is high.
You get a receipt from the processor, and you can also confirm receipt online from the IRS if you feel the need. There is no need to call the IRS. I never have called the IRS and I hope to keep it that way. :happy
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

james_madison wrote: Tue Sep 17, 2019 12:53 pm I apologize if these are basic questions, but having just come across this thread this weekend, I've been trying to make sure I understand how it may apply to my scenario.

Currently: Married and filing jointly (MFJ), itemize on our 1040, both with W-2 jobs. We have our employers withhold extra each pay period since we're a dual income household -- roughly $1k a month extra combined.

Q1: I'd like to use up my $1500 in paypal Chase Freedom (5% category) rewards, but will the IRS have issues if I just make one payment in the year?

Q2: Would the same be true as in Q1, if I wanted to overpay in December only to purchase $5k in paper I Bonds?

Q3: Could I next year set my extra withholdings to $0, and then pay the IRS twice a year (June & December) $6k each time? I say twice a year since that's the limit given by the credit card processors on a 1040 form submission. In contrast to the estimated taxes of 4 equal quarterly payments.

I'm just trying to make sure I understand this, since IRS is a four letter word to me.
A1) Not so long as you still meet a safe harbor. Estimated payments are not treated the same as withholding, which is why it may be easier to do equal payments.

A2) Depending on when you file, you would want to do a tax payment instead of an estimated payment. There is no issue with paying an extra 5k via CC with the intention to take the refund in I bonds. I would wait until I am ready to file, however, instead of paying an extra 5k well in advance.

A3) The limit is two transactions per processor per quarter. You will have no issues doing all of your quarterly payments with the same processor.
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Re: Primer on Paying Taxes With a Credit Card

Post by kaneohe »

james_madison wrote: Tue Sep 17, 2019 12:53 pm .....................................................
Q3: Could I next year set my extra withholdings to $0, and then pay the IRS twice a year (June & December) $6k each time? I say twice a year since that's the limit given by the credit card processors on a 1040 form submission. In contrast to the estimated taxes of 4 equal quarterly payments.

I'm just trying to make sure I understand this, since IRS is a four letter word to me.
You seem to be confusing a Form 1040 series payment with a Form 1040-ES payment.
https://www.irs.gov/payments/frequency- ... ax-payment

Tax Form........................... Payment Type and Tax Year........... Limit

Form 1040 series................. Current Tax Year ......................2 per year

Form 1040-ES...................... Estimated Tax...........................2 per quarter

Typically the current tax would be for balance due once the year is over........like the April remaining balance.
The estimated payments are the substitute for withholding and as pointed out earlier can be paid 2x/qtr/processor.
Withholding is the simpler method. If you want to do estimated taxes by cc for the rewards, then you would want to
do equal quarterly payments for simplicity. If you only paid June and December (Q2/Q4),you could be penalized for
paying Q1 and Q3 "late" in the following quarter.
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Re: Primer on Paying Taxes With a Credit Card

Post by Leesbro63 »

whodidntante wrote: Tue Sep 17, 2019 1:28 pm
Leesbro63 wrote: Tue Sep 17, 2019 5:42 am I just used Pay1040.com for the first time with my BofA 2.62% card. My concern is that big tax payments get posted to and by the IRS correctly. If I find out next summer that the IRS didn’t get a 2019 estimated tax payment that I assumed it did (after filing on Apr 15), wont it be too late to ask the credit card to reverse the payment or be my advocate?

I actually called the IRS to confirm receipt. They finally did, but what a major hassle to get a live person and to get my ID verified so they would give me the info. Anyone else concerned about “failure of the middle-man”. At $70 per $10,000 in tax (difference between 1040x.com fee and my 2,62% credit card rebate), I’m not sure the risk of some sort of posting failure is worth it. The risk is low but the cost and/or hassle is high.
You get a receipt from the processor, and you can also confirm receipt online from the IRS if you feel the need. There is no need to call the IRS. I never have called the IRS and I hope to keep it that way. :happy
How do you confirm the receipt online?
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Re: Primer on Paying Taxes With a Credit Card

Post by james_madison »

A1) Not so long as you still meet a safe harbor. Estimated payments are not treated the same as withholding, which is why it may be easier to do equal payments.
I think this year I'll start small with the $1,500 in Paypal payments and see what happens. I don't expect the I Bonds to be all that great anyways.

Thanks again for posting this topic!
james_madison
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Re: Primer on Paying Taxes With a Credit Card

Post by james_madison »

You seem to be confusing a Form 1040 series payment with a Form 1040-ES payment.
https://www.irs.gov/payments/frequency- ... ax-payment
Yeah you're right! I was looking at the 1040 series row. I just assumed that 1040-ES was for people who had to pay estimated taxes, but was still considering myself a normal 1040. Thanks for the clarification!
Leesbro63
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Re: Primer on Paying Taxes With a Credit Card

Post by Leesbro63 »

james_madison wrote: Tue Sep 17, 2019 3:07 pm
A1) Not so long as you still meet a safe harbor. Estimated payments are not treated the same as withholding, which is why it may be easier to do equal payments.
I think this year I'll start small with the $1,500 in Paypal payments and see what happens. I don't expect the I Bonds to be all that great anyways.

Thanks again for posting this topic!
That's what I did. Started with a $500 payment and called the IRS to confirm. That gave me the courage to do a larger amount.
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

Leesbro63 wrote: Tue Sep 17, 2019 3:02 pm
whodidntante wrote: Tue Sep 17, 2019 1:28 pm
Leesbro63 wrote: Tue Sep 17, 2019 5:42 am I just used Pay1040.com for the first time with my BofA 2.62% card. My concern is that big tax payments get posted to and by the IRS correctly. If I find out next summer that the IRS didn’t get a 2019 estimated tax payment that I assumed it did (after filing on Apr 15), wont it be too late to ask the credit card to reverse the payment or be my advocate?

I actually called the IRS to confirm receipt. They finally did, but what a major hassle to get a live person and to get my ID verified so they would give me the info. Anyone else concerned about “failure of the middle-man”. At $70 per $10,000 in tax (difference between 1040x.com fee and my 2,62% credit card rebate), I’m not sure the risk of some sort of posting failure is worth it. The risk is low but the cost and/or hassle is high.
You get a receipt from the processor, and you can also confirm receipt online from the IRS if you feel the need. There is no need to call the IRS. I never have called the IRS and I hope to keep it that way. :happy
How do you confirm the receipt online?
I'm a little slow to answer because I actually had to do it to tell you how to do it, and you know, things to do.

Go here, and login. Maybe you don't have an account, so create one.

https://sa.www4.irs.gov/ola/

Then follow the account balance link. You'll see a running total of all 2019 estimated tax payments. Or go to "view recent payments" to see estimated payment transactions. Payments made by credit card do show up there. You can see the amount and date.
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Re: Primer on Paying Taxes With a Credit Card

Post by Pu239 »

My city doesn't charge a fee for using a cc to pay property tax so naturally a high rewards cc is the way to go. Estimated federal income taxes are paid quarterly using a cc - I favor a cc with a minimum spend for a sign up bonus for these given the processing fees. I'm sure there's room for improvement in optimizing my return but these little tricks help. Waiting to see how the Sept. estimated tax payment just made is coded using a new cc. Live and learn.
Between the idea And the reality...Between the motion And the act...Falls the Shadow - T. S. Eliot
Cyanide123
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Re: Primer on Paying Taxes With a Credit Card

Post by Cyanide123 »

SCV_Lawyer wrote: Tue Mar 26, 2019 1:31 am
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.
Don't forget, you can actually categorize the fee you incur as a business expense. So even if the spread is minimal, the fee you pay is a tax deductible expense.
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Re: Primer on Paying Taxes With a Credit Card

Post by Cyanide123 »

Leesbro63 wrote: Tue Sep 17, 2019 5:42 am I just used Pay1040.com for the first time with my BofA 2.62% card. My concern is that big tax payments get posted to and by the IRS correctly. If I find out next summer that the IRS didn’t get a 2019 estimated tax payment that I assumed it did (after filing on Apr 15), wont it be too late to ask the credit card to reverse the payment or be my advocate?

I actually called the IRS to confirm receipt. They finally did, but what a major hassle to get a live person and to get my ID verified so they would give me the info. Anyone else concerned about “failure of the middle-man”. At $70 per $10,000 in tax (difference between 1040x.com fee and my 2,62% credit card rebate), I’m not sure the risk of some sort of posting failure is worth it. The risk is low but the cost and/or hassle is high.
The IRS also has an online website with all your annual tax records including all payments. You set up the profile and any payment you make shows up there within a week or so

Edit:

I believe this is the irs website. You just need to click on view your account

https://www.irs.gov/payments/view-your-tax-account
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Re: Primer on Paying Taxes With a Credit Card

Post by Cyanide123 »

Voltron wrote: Mon Mar 25, 2019 1:14 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?
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.

Any issues with the alliant card? I've started using that recently.
Naris
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Re: Primer on Paying Taxes With a Credit Card

Post by Naris »

First, thanks for putting this thread together -- some very useful information here.

As another person considering trying this out, I have a basic question about timing: what's the minimum time between submitting the payment to the IRS and getting excess money refunded back out to you?

I'm considering making significant (>$10,000) overpayments using 0% intro APR credit card(s), and then earning money on the spread between the 0% interest rate and whatever I can earn with the additional free cash during the intro period (e.g. 15 months). If the refund takes a month or two after payment, then that's no issue; if it takes six months, then that starts to make this look less attractive.

I see that a lot of people are using this to make quarterly estimated tax payments, which I don't think would fit with my planned usage. Is it possible to make a set of large payments in, say, March 2020 for the 2019 tax year, such that you'd get back the excess payments (presumably) within a few months when 2019 tax year refunds were issued?

I understand you'd want to be within a safe harbor to avoid penalties, so the excess payments would presumably be in addition to one's already adequate withholding.
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Re: Primer on Paying Taxes With a Credit Card

Post by Leesbro63 »

whodidntante wrote: Tue Sep 17, 2019 10:52 pm
Leesbro63 wrote: Tue Sep 17, 2019 3:02 pm
whodidntante wrote: Tue Sep 17, 2019 1:28 pm
Leesbro63 wrote: Tue Sep 17, 2019 5:42 am I just used Pay1040.com for the first time with my BofA 2.62% card. My concern is that big tax payments get posted to and by the IRS correctly. If I find out next summer that the IRS didn’t get a 2019 estimated tax payment that I assumed it did (after filing on Apr 15), wont it be too late to ask the credit card to reverse the payment or be my advocate?

I actually called the IRS to confirm receipt. They finally did, but what a major hassle to get a live person and to get my ID verified so they would give me the info. Anyone else concerned about “failure of the middle-man”. At $70 per $10,000 in tax (difference between 1040x.com fee and my 2,62% credit card rebate), I’m not sure the risk of some sort of posting failure is worth it. The risk is low but the cost and/or hassle is high.
You get a receipt from the processor, and you can also confirm receipt online from the IRS if you feel the need. There is no need to call the IRS. I never have called the IRS and I hope to keep it that way. :happy
How do you confirm the receipt online?
I'm a little slow to answer because I actually had to do it to tell you how to do it, and you know, things to do.

Go here, and login. Maybe you don't have an account, so create one.

https://sa.www4.irs.gov/ola/

Then follow the account balance link. You'll see a running total of all 2019 estimated tax payments. Or go to "view recent payments" to see estimated payment transactions. Payments made by credit card do show up there. You can see the amount and date.
Thank you!
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GeraniumLover
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Re: Primer on Paying Taxes With a Credit Card

Post by GeraniumLover »

whodidntante wrote: Sun Sep 15, 2019 1:31 pm Chase Freedom has Paypal as a 5% bonus category starting October 1st. There is one processor who accepts Paypal, PayUSATax. I'll be paying the first $1,500 of my estimated tax like that. Pretty nice margin.
This will net you $51, plus the value of the business expense deduction you get for the fees you will pay to PayUSATax. Not bad, but you are giving up the extra $24 you could net by spending $1500 on Chase Freedom's Q4 categories in another manner.
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

GeraniumLover wrote: Mon Sep 23, 2019 4:40 pm
whodidntante wrote: Sun Sep 15, 2019 1:31 pm Chase Freedom has Paypal as a 5% bonus category starting October 1st. There is one processor who accepts Paypal, PayUSATax. I'll be paying the first $1,500 of my estimated tax like that. Pretty nice margin.
This will net you $51, plus the value of the business expense deduction you get for the fees you will pay to PayUSATax. Not bad, but you are giving up the extra $24 you could net by spending $1500 on Chase Freedom's Q4 categories in another manner.
It's unlikely that I would find a better use for the Freedom Q4 5% category. There is another thread active where people are trying to figure it out. If I see $51 lying on the ground, I pick it up. :beer
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ResearchMed
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Re: Primer on Paying Taxes With a Credit Card

Post by ResearchMed »

JD Leonard wrote: Sun Mar 31, 2019 10:14 am 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.
Ah, this is what we need to explore, with Amex Platinum (in case the "Plat" makes any difference; we could also get a Gold or Green card IF that mattered, but don't otherwise need/want one).
Not sure about getting an Amex Business card; we've got a small business, but it's been totally inactive for a couple of years (lots of income/tax returns in previous years; we should have gotten that card then!).

We specifically need Amex Rewards Points, having just got tickets for some very long distance travel in premium class (NZ/Australia), plus having used some for other travel.
We still have lots of AAdvantage points, but there are a few preferred airlines where those points cannot be transferred.

And we also don't mind the modest transaction fee, given the cost we'd need to pay cash for those Business class tickets! (If we can upgrade using points to F from J points, we do that, because the difference in points is modest. Although we would - and have - paid cash for Business, there is no way we'd pay cash for major international F tickets.)

HOWEVER, DH isn't doing much consulting these days, so it's almost entirely W-2 income.
Is there any downside to changing from withholding and paying monthly or quarterly the same amount with a charge card?
Or overpaying a bit, just in case?
We can also add more to even it up at the end of the year, by withholding everything from the RMD's (which is NOT much until retirement when the 403b's require RMD's).

Suggestions, warnings?

Many thanks.

RM
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JD Leonard
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Re: Primer on Paying Taxes With a Credit Card

Post by JD Leonard »

ResearchMed wrote: Tue Oct 15, 2019 2:17 pm Is there any downside to changing from withholding and paying monthly or quarterly the same amount with a charge card?
Or overpaying a bit, just in case?
We can also add more to even it up at the end of the year, by withholding everything from the RMD's (which is NOT much until retirement when the 403b's require RMD's).

Suggestions, warnings?
Potential downsides include:
  • The IRS records the date of an estimated payment as the date when the payment is made (to my knowledge withholding the correct amount avoids the potential for late penalties and interest for each quarter).
  • The time value of money
  • Additional cashflow management logistics
  • Reaching the IRS maximum of two such payments per quarter (though I gather this might only be enforced per payment service provider)
Happy flying!
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ResearchMed
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Re: Primer on Paying Taxes With a Credit Card

Post by ResearchMed »

JD Leonard wrote: Wed Oct 16, 2019 1:33 am
ResearchMed wrote: Tue Oct 15, 2019 2:17 pm Is there any downside to changing from withholding and paying monthly or quarterly the same amount with a charge card?
Or overpaying a bit, just in case?
We can also add more to even it up at the end of the year, by withholding everything from the RMD's (which is NOT much until retirement when the 403b's require RMD's).

Suggestions, warnings?
Potential downsides include:
  • The IRS records the date of an estimated payment as the date when the payment is made (to my knowledge withholding the correct amount avoids the potential for late penalties and interest for each quarter).
  • The time value of money
  • Additional cashflow management logistics
  • Reaching the IRS maximum of two such payments per quarter (though I gather this might only be enforced per payment service provider)
Happy flying!
Thanks for the link.

It was looking very good... until... it appears that Amex is *not* accepted: only VISA, MasterCard, & Discover for this purpose.

Drat!

We can purchase the other points directly, so there's no point (pun intended) in jumping through the scheduling hoops with the IRS.

However, I will look into whether there are other charge cards linked with other airline programs that we might want to start using (assuming we can't transfer the points at par or less, etc.).

Many thanks!

RM
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Re: Primer on Paying Taxes With a Credit Card

Post by JD Leonard »

- JD Leonard
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Re: Primer on Paying Taxes With a Credit Card

Post by cowbman »

SCV_Lawyer wrote: Tue Mar 26, 2019 1:31 am
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.
Even if the spread is less profitable, it's still profitable. Why not pay both with the credit card? After paying off the first 50K, I assume you will have credit available to pay CA.
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Re: Primer on Paying Taxes With a Credit Card

Post by WhiteMaxima »

Make sure there is no fee to pay tax using cc. otherwise, just pay cash.
ImmigrantSaver
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Re: Primer on Paying Taxes With a Credit Card

Post by ImmigrantSaver »

I am having trouble paying the estimated tax payment using PayPal. When I get to the payment page, click PayPal and login, I only get two options to pay: Paypal Credit or my Chase Freedom Unlimited card (and not Chase Freedom that has 5% category). I do have the Chase Freedom card set as "preferred card" on my Paypal profile so I have no idea why this is happening. Anyone else had that issue?
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Re: Primer on Paying Taxes With a Credit Card

Post by czaj »

I made a payment with my wife's Chase Freedom of $1,471.17 (+ $28.83 convenience charge) the other day to hit the $1,500 5% cap.
ImmigrantSaver wrote: Thu Dec 12, 2019 11:55 am I am having trouble paying the estimated tax payment using PayPal. When I get to the payment page, click PayPal and login, I only get two options to pay: Paypal Credit or my Chase Freedom Unlimited card (and not Chase Freedom that has 5% category). I do have the Chase Freedom card set as "preferred card" on my Paypal profile so I have no idea why this is happening. Anyone else had that issue?
After being redirected to PayPal's site from payUSAtax, there should be an option to add another card (if it's not already showing up).
ImmigrantSaver
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Re: Primer on Paying Taxes With a Credit Card

Post by ImmigrantSaver »

czaj wrote: Thu Dec 12, 2019 12:38 pm I made a payment with my wife's Chase Freedom of $1,471.17 (+ $28.83 convenience charge) the other day to hit the $1,500 5% cap.
ImmigrantSaver wrote: Thu Dec 12, 2019 11:55 am I am having trouble paying the estimated tax payment using PayPal. When I get to the payment page, click PayPal and login, I only get two options to pay: Paypal Credit or my Chase Freedom Unlimited card (and not Chase Freedom that has 5% category). I do have the Chase Freedom card set as "preferred card" on my Paypal profile so I have no idea why this is happening. Anyone else had that issue?
After being redirected to PayPal's site from payUSAtax, there should be an option to add another card (if it's not already showing up).
I tried and the card actually got declined. So I went back to Paypal and deleted ChasePay (this is how I added all my chase cards to paypal in the first place) and then only added the Freedom card that I wanted to use. And it worked!

Not sure why it originally defaulted to Freedom Unlimited as I had the Freedom card chosen as "preferred card" in my PayPal profile :oops:
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Re: Primer on Paying Taxes With a Credit Card

Post by GeraniumLover »

I just received bad news from Alliant: starting March 14, they will only be paying cash back on the first $10,000 in each billing cycle.

I don't know if that limit applies to everyone or whether they imposed it on me based on my activity. I think perhaps the former, since the letter states "Most of our members will not be affected by this change as our research shows that more than 80% of our customers spend less than $10,000 per billing cycle".

Are there any other credit cards pay 2.5%+ cash back without imposing any limit?
czaj
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Re: Primer on Paying Taxes With a Credit Card

Post by czaj »

For joint filers, does anyone know if it really matters which SSN is used? I understand that it's probably safer to use the primary SSN, but was curious if you can use the secondary SSN to get 4 payments per processor with no issues.
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Re: Primer on Paying Taxes With a Credit Card

Post by Direwolf14 »

GeraniumLover wrote: Tue Feb 04, 2020 6:26 am I just received bad news from Alliant: starting March 14, they will only be paying cash back on the first $10,000 in each billing cycle.

I don't know if that limit applies to everyone or whether they imposed it on me based on my activity. I think perhaps the former, since the letter states "Most of our members will not be affected by this change as our research shows that more than 80% of our customers spend less than $10,000 per billing cycle".

Are there any other credit cards pay 2.5%+ cash back without imposing any limit?
BoA Premium Rewards Visa with Preferred Rewards Platinum Honors (100k at BoA/Merrill). It's 2.625% cash back with a $95 annual fee (also includes $100 travel credit, so net positive $5 if you can make use of that).
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Re: Primer on Paying Taxes With a Credit Card

Post by GeraniumLover »

Direwolf14 wrote: Sat Apr 11, 2020 1:09 pm
GeraniumLover wrote: Tue Feb 04, 2020 6:26 am I just received bad news from Alliant: starting March 14, they will only be paying cash back on the first $10,000 in each billing cycle.

I don't know if that limit applies to everyone or whether they imposed it on me based on my activity. I think perhaps the former, since the letter states "Most of our members will not be affected by this change as our research shows that more than 80% of our customers spend less than $10,000 per billing cycle".

Are there any other credit cards pay 2.5%+ cash back without imposing any limit?
BoA Premium Rewards Visa with Preferred Rewards Platinum Honors (100k at BoA/Merrill). It's 2.625% cash back with a $95 annual fee (also includes $100 travel credit, so net positive $5 if you can make use of that).
So no annual/quarterly/monthly limit on the 2.625% cash back?
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

GeraniumLover wrote: Sun Apr 12, 2020 10:37 am So no annual/quarterly/monthly limit on the 2.625% cash back?
There is no limit.
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Re: Primer on Paying Taxes With a Credit Card

Post by czaj »

czaj wrote: Sat Apr 11, 2020 12:55 pm For joint filers, does anyone know if it really matters which SSN is used? I understand that it's probably safer to use the primary SSN, but was curious if you can use the secondary SSN to get 4 payments per processor with no issues.
Bumping my previous question in case anyone has had any experience with this.

Also, how would you round your estimated taxes in a given quarter if making multiple payments? For example, say in a given quarter you made two $1,499.50 payments with two credit cards. Which would you report for that quarter's estimated tax payments?

A: $2,999
B: $3,000
C: Something else
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Re: Primer on Paying Taxes With a Credit Card

Post by TravelGeek »

czaj wrote: Wed Apr 15, 2020 5:59 pm
czaj wrote: Sat Apr 11, 2020 12:55 pm For joint filers, does anyone know if it really matters which SSN is used? I understand that it's probably safer to use the primary SSN, but was curious if you can use the secondary SSN to get 4 payments per processor with no issues.
Bumping my previous question in case anyone has had any experience with this.
No experience but

https://www.officialpayments.com/fed/hp ... ow_p.jsp#4

says to use the first SSN. So does

https://www.pay1040.com/TaxPayerTools/F ... question09
Also, how would you round your estimated taxes in a given quarter if making multiple payments? For example, say in a given quarter you made two $1,499.50 payments with two credit cards. Which would you report for that quarter's estimated tax payments?

A: $2,999
B: $3,000
C: Something else
C: I’d make two payments of $1500.00 each :)
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Re: Primer on Paying Taxes With a Credit Card

Post by kaneohe »

https://taxmap.irs.gov/taxmap2017/instr ... nr-012.htm

"If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and round off only the total."
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Re: Primer on Paying Taxes With a Credit Card

Post by dragoncar »

czaj wrote: Sat Apr 11, 2020 12:55 pm For joint filers, does anyone know if it really matters which SSN is used? I understand that it's probably safer to use the primary SSN, but was curious if you can use the secondary SSN to get 4 payments per processor with no issues.
Did this last year and it worked. The previously linked boardingarea comment section also has a couple people who say they do it every year. 4 estimated payments via payusatax for the 5% paypal rewards. It worked, but the payments for each SSN show up separately on IRS online (e.g. primary SSN shows 2 payments and secondary SSN shows 2 payments). The record of account transcript looks like this:

Code: Select all

660	Estimated tax payment		12-01-2019	-1500.00
660	Estimated tax payment		12-01-2019	-1500.00
666	Estimated tax transferred in	12-01-2019	-3000.00
Thus, it looks like someone might have to manually fix the issue by "transferring in" although it's also possible it's automatic. If someone is looking at it, maybe it raises a red flag. No issue for me so far, though, and I'm trying to do a bunch with $500 gift cards from the grocery category this month.

The gift cards have a $5.99 fee, but Pay1040 only charges you the debit fee of a flat $2.58, so thats a total cost similar to the 1.87% they charge for credit cards. Unfortunately, the other two processors would not accept my gift cards.
czaj
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Re: Primer on Paying Taxes With a Credit Card

Post by czaj »

dragoncar wrote: Wed Jun 10, 2020 12:44 am
czaj wrote: Sat Apr 11, 2020 12:55 pm For joint filers, does anyone know if it really matters which SSN is used? I understand that it's probably safer to use the primary SSN, but was curious if you can use the secondary SSN to get 4 payments per processor with no issues.
Did this last year and it worked. The previously linked boardingarea comment section also has a couple people who say they do it every year. 4 estimated payments via payusatax for the 5% paypal rewards. It worked, but the payments for each SSN show up separately on IRS online (e.g. primary SSN shows 2 payments and secondary SSN shows 2 payments). The record of account transcript looks like this:

Code: Select all

660	Estimated tax payment		12-01-2019	-1500.00
660	Estimated tax payment		12-01-2019	-1500.00
666	Estimated tax transferred in	12-01-2019	-3000.00
Thus, it looks like someone might have to manually fix the issue by "transferring in" although it's also possible it's automatic. If someone is looking at it, maybe it raises a red flag. No issue for me so far, though, and I'm trying to do a bunch with $500 gift cards from the grocery category this month.

The gift cards have a $5.99 fee, but Pay1040 only charges you the debit fee of a flat $2.58, so thats a total cost similar to the 1.87% they charge for credit cards. Unfortunately, the other two processors would not accept my gift cards.
Great, thanks for sharing!
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Re: Primer on Paying Taxes With a Credit Card

Post by VCC »

Earlier this year when Simon malls were open, you could buy 1k Visa gift cards for $3.95 & use them as a debit card to pay taxes. Using my Alliant cash back 2.5%, I would get about $18-$19 cash back per 1k depending on which IRS processer I used vs almost $7 cashback using the credit card directly to pay the IRS processer. Another way is to open a Green Dot Bank checking account to pay taxes using their debit card. It pays 3% cash back but will go down to 2% starting June 30th. They pay cash back out annually instead of monthly. For instance, I have 15,000 estimated tax due on July 15. Using Green Dot to make my payment by June 29 I'll get back $447.53 after $2.55 IRS processing fee. Even after June 29th at 2% cash back you would still make $297.50 after the processing fee. A 3% cash back credit card w/ a 1.87% processing fee would net you about $178.
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Re: Primer on Paying Taxes With a Credit Card

Post by international001 »

bump

Would BoA Cash rewards work with online category? It's 3%*1.75 = 4.5% with platinum honors
ZinCO
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Re: Primer on Paying Taxes With a Credit Card

Post by ZinCO »

international001 wrote: Tue Jan 12, 2021 12:18 pm bump

Would BoA Cash rewards work with online category? It's 3%*1.75 = 4.5% with platinum honors
Did not work for me this week. Only got 1%*1.75 for my state taxes (which do not use any of the Fed processors, so it's still possible...)
international001
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Re: Primer on Paying Taxes With a Credit Card

Post by international001 »

So each processor can classify the payment under a different category? How to know in advance?
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