Opening New CC for Federal Income Tax Bill

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Topic Author
gmc4h232
Posts: 240
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Opening New CC for Federal Income Tax Bill

Post by gmc4h232 » Sun Feb 03, 2019 8:23 pm

Looking at a $7k federal income tax bill this year. Thinking about opening a Capital One Savor card to pay the bill and getting $500 bonus then closing the card before the annual fee kicks in. Would i also get the 1% rewards on the $7k to help offset the 1.87% convenience fee?

Other than the hassle? what are the drawbacks?

michaeljc70
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Re: Opening New CC for Federal Income Tax Bill

Post by michaeljc70 » Sun Feb 03, 2019 8:44 pm

You only have to spend $3k to get the bonus so why charge $7k and pay a fee on all of it?

pdavi21
Posts: 573
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Re: Opening New CC for Federal Income Tax Bill

Post by pdavi21 » Sun Feb 03, 2019 8:55 pm

Wow. That's an awesome idea. But I guess you would have to be a low spender (can't do 3k in 3 months) and a high earner (3k more tax than last year) to not call the 2% fee lost money. Rare combo.

Topic Author
gmc4h232
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Re: Opening New CC for Federal Income Tax Bill

Post by gmc4h232 » Sun Feb 03, 2019 8:58 pm

michaeljc70 wrote:
Sun Feb 03, 2019 8:44 pm
You only have to spend $3k to get the bonus so why charge $7k and pay a fee on all of it?
Think I can put 3k on capital one card and the remainder on current 2% cash back card to optimize?

michaeljc70
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Re: Opening New CC for Federal Income Tax Bill

Post by michaeljc70 » Sun Feb 03, 2019 8:59 pm

gmc4h232 wrote:
Sun Feb 03, 2019 8:58 pm
michaeljc70 wrote:
Sun Feb 03, 2019 8:44 pm
You only have to spend $3k to get the bonus so why charge $7k and pay a fee on all of it?
Think I can put 3k on capital one card and the remainder on current 2% cash back card to optimize?
Sure. Or just pay the remaining $4k with a check.

lakpr
Posts: 585
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Re: Opening New CC for Federal Income Tax Bill

Post by lakpr » Sun Feb 03, 2019 9:07 pm

Putting 4k on a 2% cash back card nets you a grand total of $5.20 compared to simply paying by check. The reward is miniscule, but if you are planning to hyper optimize the rewards, it may be worth it.

flight
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Re: Opening New CC for Federal Income Tax Bill

Post by flight » Sun Feb 03, 2019 9:12 pm

Does anyone know if the fees paid to the processor are tax deductible?

I noticed this on the IRS website:

Fees and Information

Your payment will be processed by a payment processor who will charge a processing fee.
The fees vary by service provider and may be tax deductible.

thanks

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whodidntante
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Re: Opening New CC for Federal Income Tax Bill

Post by whodidntante » Sun Feb 03, 2019 9:15 pm

flight wrote:
Sun Feb 03, 2019 9:12 pm
Does anyone know if the fees paid to the processor are tax deductible?

I noticed this on the IRS website:

Fees and Information

Your payment will be processed by a payment processor who will charge a processing fee.
The fees vary by service provider and may be tax deductible.

thanks
It may be deductible for a business. I think some/all 2% floor deductions were eliminated for individuals. I doubt many individuals could deduct it anyway.

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dodecahedron
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Re: Opening New CC for Federal Income Tax Bill

Post by dodecahedron » Sun Feb 03, 2019 9:19 pm

flight wrote:
Sun Feb 03, 2019 9:12 pm
Does anyone know if the fees paid to the processor are tax deductible?

I noticed this on the IRS website:

Fees and Information

Your payment will be processed by a payment processor who will charge a processing fee.
The fees vary by service provider and may be tax deductible.

thanks
They used to be included as a misc itemized deduction on Schedule A. Under TCJA, misc deductions are generally no longer allowed on federal returns. Some state income tax rules might allow it as a deduction from state taxable income.

MotoTrojan
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Re: Opening New CC for Federal Income Tax Bill

Post by MotoTrojan » Sun Feb 03, 2019 9:26 pm

gmc4h232 wrote:
Sun Feb 03, 2019 8:58 pm
michaeljc70 wrote:
Sun Feb 03, 2019 8:44 pm
You only have to spend $3k to get the bonus so why charge $7k and pay a fee on all of it?
Think I can put 3k on capital one card and the remainder on current 2% cash back card to optimize?
Why not get another card that pays for $4K spend too, such as the Chase Saphire Preferred ($500 cash or $625 airfare).

UpperNwGuy
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Re: Opening New CC for Federal Income Tax Bill

Post by UpperNwGuy » Sun Feb 03, 2019 9:26 pm

gmc4h232 wrote:
Sun Feb 03, 2019 8:23 pm
Looking at a $7k federal income tax bill this year. Thinking about opening a Capital One Savor card to pay the bill and getting $500 bonus then closing the card before the annual fee kicks in. Would i also get the 1% rewards on the $7k to help offset the 1.87% convenience fee?

Other than the hassle? what are the drawbacks?
Whether or not you would get the 1% rewards depends upon how Capital One treats the tax payment. If they treat it as a purchase, you probably would get the rewards. If they treat it as a cash advance, you would not. I'm sure there is a thread on Reddit or myFICO that addresses such issues. You should ask your question there.

khh
Posts: 255
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Re: Opening New CC for Federal Income Tax Bill

Post by khh » Sun Feb 03, 2019 9:29 pm

flight wrote:
Sun Feb 03, 2019 9:12 pm
Does anyone know if the fees paid to the processor are tax deductible?

I noticed this on the IRS website:

Fees and Information

Your payment will be processed by a payment processor who will charge a processing fee.
The fees vary by service provider and may be tax deductible.

thanks
What about using EFTPS? There are no processing fees.
Edit: Never mind the question.
Last edited by khh on Sun Feb 03, 2019 9:42 pm, edited 1 time in total.

Topic Author
gmc4h232
Posts: 240
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Re: Opening New CC for Federal Income Tax Bill

Post by gmc4h232 » Sun Feb 03, 2019 9:30 pm

lakpr wrote:
Sun Feb 03, 2019 9:07 pm
Putting 4k on a 2% cash back card nets you a grand total of $5.20 compared to simply paying by check. The reward is miniscule, but if you are planning to hyper optimize the rewards, it may be worth it.
I get $6.70. Here is my math:

$4,000 * 1.87% processing fee = $74.80; $4074.80 total charged to card; $4,074.80*2% = $81.50 in rewards. $81.50-$74.80 = $6.70

If I write a check, I have to write a check and mail it which means I also have to buy a stamp.

So to recap, I make money paying by CC and save the hassle of having to mail.

michaeljc70
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Joined: Thu Oct 15, 2015 3:53 pm

Re: Opening New CC for Federal Income Tax Bill

Post by michaeljc70 » Sun Feb 03, 2019 9:43 pm

khh wrote:
Sun Feb 03, 2019 9:29 pm
flight wrote:
Sun Feb 03, 2019 9:12 pm
Does anyone know if the fees paid to the processor are tax deductible?

I noticed this on the IRS website:

Fees and Information

Your payment will be processed by a payment processor who will charge a processing fee.
The fees vary by service provider and may be tax deductible.

thanks
What about using EFTPS? There are no processing fees.
Edit: Never mind the question.
There are for credit cards:

https://www.irs.gov/payments/pay-taxes- ... debit-card

Topic Author
gmc4h232
Posts: 240
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Re: Opening New CC for Federal Income Tax Bill

Post by gmc4h232 » Mon Feb 04, 2019 8:09 pm

Card approved.

Total elapsed time - 4 minutes 37 seconds.

Phase 1 complete.

Gil Gunderson
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Re: Opening New CC for Federal Income Tax Bill

Post by Gil Gunderson » Mon Feb 04, 2019 8:20 pm

I would set the cash advance limit on the card to $0 or as low as they will let. Sometimes these get coded as a cash advance and you will pay a 3% fee and get no cash back.

pdavi21
Posts: 573
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Re: Opening New CC for Federal Income Tax Bill

Post by pdavi21 » Mon Feb 04, 2019 8:24 pm

Gil Gunderson wrote:
Mon Feb 04, 2019 8:20 pm
I would set the cash advance limit on the card to $0 or as low as they will let. Sometimes these get coded as a cash advance and you will pay a 3% fee and get no cash back.
I don't think it will, but wouldn't lowering your limit just net you another fee for exceeding it?

jhh9327
Posts: 262
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Re: Opening New CC for Federal Income Tax Bill

Post by jhh9327 » Mon Feb 04, 2019 8:30 pm

Gil Gunderson wrote:
Mon Feb 04, 2019 8:20 pm
I would set the cash advance limit on the card to $0 or as low as they will let. Sometimes these get coded as a cash advance and you will pay a 3% fee and get no cash back.

I guess it is possible, but I've paid taxes several times with credit cards for similar reasons as OP, and it's never been coded as a cash advance. It's a good, legitimate way to hit credit card spend requirements when used strategically to achieve bonuses.

Topic Author
gmc4h232
Posts: 240
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Re: Opening New CC for Federal Income Tax Bill

Post by gmc4h232 » Mon Feb 04, 2019 9:29 pm

jhh9327 wrote:
Mon Feb 04, 2019 8:30 pm
Gil Gunderson wrote:
Mon Feb 04, 2019 8:20 pm
I would set the cash advance limit on the card to $0 or as low as they will let. Sometimes these get coded as a cash advance and you will pay a 3% fee and get no cash back.

I guess it is possible, but I've paid taxes several times with credit cards for similar reasons as OP, and it's never been coded as a cash advance. It's a good, legitimate way to hit credit card spend requirements when used strategically to achieve bonuses.
Why would this ever be coded as a cash advance?

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whodidntante
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Re: Opening New CC for Federal Income Tax Bill

Post by whodidntante » Mon Feb 04, 2019 9:49 pm

gmc4h232 wrote:
Mon Feb 04, 2019 9:29 pm
Why would this ever be coded as a cash advance?
People say things. I have not seen a single data point of a tax payment being treated as a cash advance.

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fortfun
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Re: Opening New CC for Federal Income Tax Bill

Post by fortfun » Mon Feb 04, 2019 10:11 pm

gmc4h232 wrote:
Sun Feb 03, 2019 8:23 pm
Looking at a $7k federal income tax bill this year. Thinking about opening a Capital One Savor card to pay the bill and getting $500 bonus then closing the card before the annual fee kicks in. Would i also get the 1% rewards on the $7k to help offset the 1.87% convenience fee?

Other than the hassle? what are the drawbacks?
Check docofcredit. I've seen 1k bonuses for 7k of spending recently.

pdavi21
Posts: 573
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Re: Opening New CC for Federal Income Tax Bill

Post by pdavi21 » Tue Feb 05, 2019 10:13 am

Can OP bump this when it works (500 posts). If, god forbid, my taxes take a big jump this year, and I fail to estimate them properly :wink:, I'd like to employ this strategy this year.

Also, do you have to wait for return to be processed before you pay, or can you pay at any time between 1/28 and 4/15?

Topic Author
gmc4h232
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Re: Opening New CC for Federal Income Tax Bill

Post by gmc4h232 » Sun Feb 10, 2019 7:46 am

Savor card came in the mail yesterday. It's metal! How neat!

Spent approximately 9 minutes on the phone with customer service activating the card and poking around the online account and linking savings acct for future bill paying.

Total elapsed time so far - Approximately 14 minutes.

Still waiting on 1099 from Vanguard to file taxes....

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Stinky
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Re: Opening New CC for Federal Income Tax Bill

Post by Stinky » Sun Feb 10, 2019 9:18 am

pdavi21 wrote:
Tue Feb 05, 2019 10:13 am

Also, do you have to wait for return to be processed before you pay, or can you pay at any time between 1/28 and 4/15?
If you owe taxes, I'm not seeing why you would want to have your return "processed" before paying the taxes.

I think that you would want to pay the taxes when you submit the return. Likely, as close to April 15 as possible . . . .
It's a GREAT day to be alive - Travis Tritt

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sunny_socal
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Re: Opening New CC for Federal Income Tax Bill

Post by sunny_socal » Sun Feb 10, 2019 10:35 am

Stinky wrote:
Sun Feb 10, 2019 9:18 am
pdavi21 wrote:
Tue Feb 05, 2019 10:13 am

Also, do you have to wait for return to be processed before you pay, or can you pay at any time between 1/28 and 4/15?
If you owe taxes, I'm not seeing why you would want to have your return "processed" before paying the taxes.

I think that you would want to pay the taxes when you submit the return. Likely, as close to April 15 as possible . . . .
Yes. I may prepare my taxes as soon as I have all the forms but I'm no rush to file.

Topic Author
gmc4h232
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Re: Opening New CC for Federal Income Tax Bill

Post by gmc4h232 » Sun Feb 10, 2019 11:53 am

Stinky wrote:
Sun Feb 10, 2019 9:18 am
pdavi21 wrote:
Tue Feb 05, 2019 10:13 am

Also, do you have to wait for return to be processed before you pay, or can you pay at any time between 1/28 and 4/15?
If you owe taxes, I'm not seeing why you would want to have your return "processed" before paying the taxes.

I think that you would want to pay the taxes when you submit the return. Likely, as close to April 15 as possible . . . .
When you file/pay impacts the amount of the underpayment penalty if one is being assessed. So just keep that in mind.

Topic Author
gmc4h232
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Re: Opening New CC for Federal Income Tax Bill

Post by gmc4h232 » Tue Feb 19, 2019 8:51 pm

pdavi21 wrote:
Tue Feb 05, 2019 10:13 am
Can OP bump this when it works (500 posts). If, god forbid, my taxes take a big jump this year, and I fail to estimate them properly :wink:, I'd like to employ this strategy this year.

Also, do you have to wait for return to be processed before you pay, or can you pay at any time between 1/28 and 4/15?
E-filed with turbo tax on Sunday and paid $2,946 of the tax bill + $55.09 convenience fee with the new card through pay1040.com. Made a second payment on pay1040.com for the balance of tax owed on citi double cash card.

$530.01 in rewards posted to the new CC account today. I've already applied that amount to the CC balance. Should post in 2-3 business days.

Topic Author
gmc4h232
Posts: 240
Joined: Wed Jan 27, 2016 8:11 am

Re: Opening New CC for Federal Income Tax Bill

Post by gmc4h232 » Tue Feb 19, 2019 8:55 pm

MotoTrojan wrote:
Sun Feb 03, 2019 9:26 pm
gmc4h232 wrote:
Sun Feb 03, 2019 8:58 pm
michaeljc70 wrote:
Sun Feb 03, 2019 8:44 pm
You only have to spend $3k to get the bonus so why charge $7k and pay a fee on all of it?
Think I can put 3k on capital one card and the remainder on current 2% cash back card to optimize?
Why not get another card that pays for $4K spend too, such as the Chase Saphire Preferred ($500 cash or $625 airfare).
Probably could have done this...

pdavi21
Posts: 573
Joined: Sat Jan 30, 2016 4:04 pm

Re: Opening New CC for Federal Income Tax Bill

Post by pdavi21 » Tue Feb 19, 2019 8:59 pm

gmc4h232 wrote:
Tue Feb 19, 2019 8:51 pm
pdavi21 wrote:
Tue Feb 05, 2019 10:13 am
Can OP bump this when it works (500 posts). If, god forbid, my taxes take a big jump this year, and I fail to estimate them properly :wink:, I'd like to employ this strategy this year.

Also, do you have to wait for return to be processed before you pay, or can you pay at any time between 1/28 and 4/15?
E-filed with turbo tax on Sunday and paid $2,946 of the tax bill + $55.09 convenience fee with the new card through pay1040.com. Made a second payment on pay1040.com for the balance of tax owed on citi double cash card.

$530.01 in rewards posted to the new CC account today. I've already applied that amount to the CC balance. Should post in 2-3 business days.
Cool, thanks.

JBTX
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Re: Opening New CC for Federal Income Tax Bill

Post by JBTX » Tue Feb 19, 2019 10:23 pm

I really want to do this too but I may have run out of cards with big bonuses. Will be on the lookout next month or so.

AlphaLess
Posts: 1355
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Location: Kentucky

Re: Opening New CC for Federal Income Tax Bill

Post by AlphaLess » Tue Feb 19, 2019 11:44 pm

gmc4h232 wrote:
Sun Feb 03, 2019 8:23 pm
Looking at a $7k federal income tax bill this year. Thinking about opening a Capital One Savor card to pay the bill and getting $500 bonus then closing the card before the annual fee kicks in. Would i also get the 1% rewards on the $7k to help offset the 1.87% convenience fee?

Other than the hassle? what are the drawbacks?
If you gonna play that trick, may as well find the cards with the best bonuses.

I would go with the Chase Ink Plus Business card: spend $5K, get 80K Chase Points (to me those are worth around $1.2K). Minus the $100 for the payment fees and $95 for annual fee.
"You can get more with a kind word and a gun than with just a kind word." George Washington

SRenaeP
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Re: Opening New CC for Federal Income Tax Bill

Post by SRenaeP » Wed Feb 20, 2019 9:20 am

JBTX wrote:
Tue Feb 19, 2019 10:23 pm
I really want to do this too but I may have run out of cards with big bonuses. Will be on the lookout next month or so.
SPG AmEx has been rebranded as Bonvoy AmEx. I just saw a 100k points bonus out there. $5k min spend in three months. There is a $450 annual fee BUT you get reimbursed for $300 of Marriott spend as well as Global Entry.

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