Primer on Paying Taxes With a Credit Card

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czaj
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Re: Primer on Paying Taxes With a Credit Card

Post by czaj »

tananaev wrote: Thu Mar 18, 2021 1:42 pm I'm planning to try Jiko this year:

https://jiko.io/

It's a debit card that gives 1% cashback on IRS payments. Because it's a debit card, there's only a fixed fee, so essentially you get the whole 1% back on a large amount.
Interesting. Their reward terms specify “irs.gov”. Does that mean through a payment processor? Or am I missing an option to use a debit card directly with the IRS?
Payments made with your Jiko Virtual Debit Card for Tax Payments, which only include federal personal tax payments via https://www.irs.gov. This would include transactions posted and cleared during the previous statement cycle.
BH13
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Re: Primer on Paying Taxes With a Credit Card

Post by BH13 »

czaj wrote: Thu Mar 18, 2021 1:52 pm Interesting. Their reward terms specify “irs.gov”. Does that mean through a payment processor? Or am I missing an option to use a debit card directly with the IRS?
Directly with the IRS @ https://www.irs.gov/payments
ZinCO
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Re: Primer on Paying Taxes With a Credit Card

Post by ZinCO »

BH13 wrote: Thu Mar 18, 2021 2:11 pm
czaj wrote: Thu Mar 18, 2021 1:52 pm Interesting. Their reward terms specify “irs.gov”. Does that mean through a payment processor? Or am I missing an option to use a debit card directly with the IRS?
Directly with the IRS @ https://www.irs.gov/payments
The IRS outsources CC payments to the 3 processors discussed above, so I'm not clear on what irs.gov means in this context.
calwatch
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Re: Primer on Paying Taxes With a Credit Card

Post by calwatch »

soxpatsbos wrote: Thu Mar 18, 2021 1:15 pm So what's the best cashback card to pay ~50k in taxes? I see the minimum fees charged by processors have gone up from 1.88 to 1.96%. Assuming 2% cashback, is it better to look for some other offer? Pointers, tips greatly appreciated.
It probably should be a multiple of sign up bonuses that require high spending. Notably, unlike most other "manufactured spending", AMEX allows for tax payments to count toward a sign up bonus. Then, a standard 2% card (if you don't qualify for the BoA 2.625% Travel Rewards card).
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Re: Primer on Paying Taxes With a Credit Card

Post by drk »

calwatch wrote: Thu Mar 18, 2021 5:26 pm Notably, unlike most other "manufactured spending", AMEX allows for tax payments to count toward a sign up bonus.
NB: Income tax payments are not manufactured spending. They are real spending. Amex also pays rewards on property tax payments and sales taxes associated with purchases.
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Credit Card with Highest Cashback % (Paying Taxes)

Post by Kookaburra »

[Thread merged into here --admin LadyGeek]

I am interested in using a credit card to make quarterly tax payments. I understand there is a fee to do so, but it can still make sense if the CC cashback % exceeds the fee %.

What CCs offer the highest cashback % for use in paying taxes?

Thank you
tananaev
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Re: Credit Card with Highest Cashback % (Paying Taxes)

Post by tananaev »

If you have preferred rewards status with BofA, you can get 2.6% cashback on Travel Rewards card. Net ~0.6% cashback after fees.

Better option is to pay with debit card. For example, I paid with Jiko debit card and got 1% on a fairly large amount (minus ~$2 fixed fee).

Another option is to get signup bonus on a new credit card.
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Re: Credit Card with Highest Cashback % (Paying Taxes)

Post by JoMoney »

Alliant Credit Union has a 2.5% cash back card , but has a $99 annual fee.

2% seems to be the top for the no annual fee cards... which is only just barely higher than the cheapest tax payment processor.
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Re: Credit Card with Highest Cashback % (Paying Taxes)

Post by William Million »

If you travel, one of the cards that rewards points for airline tickets or hotel stays might compensate more, especially some of the currently large sign-up bonuses.
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Re: Credit Card with Highest Cashback % (Paying Taxes)

Post by calwatch »

I would agree that taxes are a great idea for sign up bonuses, particularly American Express with their large bonuses and suspicions about other forms of gaming such as large grocery store gift card purchases.
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Re: Credit Card with Highest Cashback % (Paying Taxes)

Post by cowbman »

As above. Sign Up bonuses or 2%+ cards, but I always pay with cash back debit cards since it's a flat fee and not a %, so it's always better than the 2%+ credit card.
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Re: Credit Card with Highest Cashback % (Paying Taxes)

Post by Darth Vanguard »

JoMoney wrote: Mon May 17, 2021 11:19 pm Alliant Credit Union has a 2.5% cash back card , but has a $99 annual fee.
In the past, I used the Alliant credit card for taxes. About two years ago, they capped the 2.5% cash back on the first $10,000 spent per statement cycle. I continue to use this card for personal spending, so between that and the 10k cap, I don't have enough wiggle room left to cover the taxes. I used to get good offers from the Capital One Spark card in the mail ( $1,500 - $2,500 cash bonus), but those disappeared when COVID hit. If I get another one of those offers, I will use that. For now I just use EFTPS.
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Re: Primer on Paying Taxes With a Credit Card

Post by LadyGeek »

I merged Kookaburra's thread into a similar discussion.

(Thanks to the member who reported the post and provided a link to this thread.)
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rich126
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Re: Primer on Paying Taxes With a Credit Card

Post by rich126 »

I had a huge tax bill this year and put part of it (10%) on a card to get the sign up bonus. It didn't make sense with the nearly 2% fee to use a credit card to put the rest on a card. I could have signed up for more cards but I got plenty and currently more points than I can use. And while getting maybe 1.5 points on a chase card probably exceeds the 2% fee (since they can be redeemed for 1.5 cents or more and 1.5 * 1.5 > 2) it wasn't enough for me to do it. (didn't really want to pay now for more points that I won't use for a few years and their likely devaluation).

The remainder I just used a bank account transfer.
ZinCO
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Re: Primer on Paying Taxes With a Credit Card

Post by ZinCO »

rich126 wrote: Tue May 18, 2021 2:44 pm I had a huge tax bill this year and put part of it (10%) on a card to get the sign up bonus. It didn't make sense with the nearly 2% fee to use a credit card to put the rest on a card. I could have signed up for more cards but I got plenty and currently more points than I can use. And while getting maybe 1.5 points on a chase card probably exceeds the 2% fee (since they can be redeemed for 1.5 cents or more and 1.5 * 1.5 > 2) it wasn't enough for me to do it. (didn't really want to pay now for more points that I won't use for a few years and their likely devaluation).

The remainder I just used a bank account transfer.
That's really the way to look at it... Use online taxes for meeting sign-up bonuses as needed, or for getting cash back in excess of the 1.9% fees. Stockpiling a bunch of points at a cost >0 is a dangerous game due to the constant threat of devaluation.
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Re: Primer on Paying Taxes With a Credit Card

Post by MisterBill »

Another option if you have the AMEX Blue Cash Preferred (BCP) card is to buy $500 Visa/MC gift cards at a supermarket, since you get 6% back on those purchases. Stop & Shop and Giant supermarkets have a deal through Thursay where you get 3x points on Mastercard purchases, which means $15 back on grocery or up to $30 if used for gas and you buy 20 gallons. Bonus is that you'll pay the reduced debit card fee when you use them to pay your taxes. Sadly, only two of the three services accepted the MC as a debit card.

I recently got a new BCP card for my wife since I had maxed out the $6k in grocery purchases for the year. There was no annual fee the first year and I got a referral bonus and she got a sign-up bonus when she spends $3k in the first six months.
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Re: Primer on Paying Taxes With a Credit Card

Post by bogcir »

Just throwing this out there, as I just saw this.

https://blog.coinbase.com/coinbase-card ... 08e72cd0b5

Coinbase offers a 4% back VISA Debit Card, though 4% is paid back in crypto (Stellar Lumens). I imagine if you immediately convert to USD, it shouldn't be a big holding risk. The card hasn't fully launched yet, so there may be more of a catch, but it seems potentially lucrative since the debit card fee for paying taxes is small.

Anyone considering this?

edit: Found more details.

https://help.coinbase.com/en/coinbase/t ... e-card-faq
Currently, the daily spending limit is £10,000 / 10.000 €. Feel free to contact cardsupport@coinbase.com if you would like to change your daily spending limit. Additionally, there’s a monthly purchase limit of £20,000 / 20.000 € and a yearly purchase limit of £100,000 / 100.000 €.
So, perhaps not enough to be really worth using, but something to keep an eye on.
Last edited by bogcir on Tue Jun 01, 2021 10:32 am, edited 2 times in total.
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Re: Primer on Paying Taxes With a Credit Card

Post by LadyGeek »

^^^ A quick reminder to see the site owner's post: New Forum Policy Prohibiting Discussions of Cryptocurrency, Market Manipulation Schemes, etc as Investing Strategies
Alex Frakt wrote: Wed May 19, 2021 1:46 am Note - This policy is limited to discussions of investing strategies. Discussions of cryptocurrencies in other contexts is still acceptable, for example for money transfers or microtransactions or the current thread on crypto trades and tax loss harvesting.
Discussion in the context of credit cards is fine.
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czaj
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Re: Primer on Paying Taxes With a Credit Card

Post by czaj »

It seems that payUSAtax may be limiting the number of times you can use PayPal in a year. I just tried paying taxes using two Discover cards, but the PayPal option won't load for the second one.

When I change the social security number to be neither me or my wife's, it loads properly...
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Re: Primer on Paying Taxes With a Credit Card

Post by kilowattcorn »

czaj wrote: Mon Sep 13, 2021 9:38 am It seems that payUSAtax may be limiting the number of times you can use PayPal in a year. I just tried paying taxes using two Discover cards, but the PayPal option won't load for the second one.

When I change the social security number to be neither me or my wife's, it loads properly...
I've been struggling to resolve an issue with PayUSATax and the IRS (viewtopic.php?p=6191047&sid=1aa3e4ce90c ... c#p6191047). The IRS requires the credit card processors to send them only two payments per TIN per form.

The IRS has some other publicly disclosed limits (https://www.irs.gov/payments/frequency- ... ax-payment) but enforcement of this seems inconsistent.

It is also challenging to discuss multiple payments of the same amount for the same form with the IRS agents so it is helpful if the amounts you pay are distinct (e.g. $4999 and $5001 instead of $10000).
czaj
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Re: Primer on Paying Taxes With a Credit Card

Post by czaj »

kilowattcorn wrote: Mon Sep 13, 2021 9:54 am
czaj wrote: Mon Sep 13, 2021 9:38 am It seems that payUSAtax may be limiting the number of times you can use PayPal in a year. I just tried paying taxes using two Discover cards, but the PayPal option won't load for the second one.

When I change the social security number to be neither me or my wife's, it loads properly...
I've been struggling to resolve an issue with PayUSATax and the IRS (viewtopic.php?p=6191047&sid=1aa3e4ce90c ... c#p6191047). The IRS requires the credit card processors to send them only two payments per TIN per form.

The IRS has some other publicly disclosed limits (https://www.irs.gov/payments/frequency- ... ax-payment) but enforcement of this seems inconsistent.

It is also challenging to discuss multiple payments of the same amount for the same form with the IRS agents so it is helpful if the amounts you pay are distinct (e.g. $4999 and $5001 instead of $10000).
I understand the rules. I've done this in the past with no problems.

Has anyone ever used their sole proprietor EIN to process an individual tax payment?
tj
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Re: Primer on Paying Taxes With a Credit Card

Post by tj »

czaj wrote: Mon Sep 13, 2021 10:22 am
kilowattcorn wrote: Mon Sep 13, 2021 9:54 am
czaj wrote: Mon Sep 13, 2021 9:38 am It seems that payUSAtax may be limiting the number of times you can use PayPal in a year. I just tried paying taxes using two Discover cards, but the PayPal option won't load for the second one.

When I change the social security number to be neither me or my wife's, it loads properly...
I've been struggling to resolve an issue with PayUSATax and the IRS (viewtopic.php?p=6191047&sid=1aa3e4ce90c ... c#p6191047). The IRS requires the credit card processors to send them only two payments per TIN per form.

The IRS has some other publicly disclosed limits (https://www.irs.gov/payments/frequency- ... ax-payment) but enforcement of this seems inconsistent.

It is also challenging to discuss multiple payments of the same amount for the same form with the IRS agents so it is helpful if the amounts you pay are distinct (e.g. $4999 and $5001 instead of $10000).
I understand the rules. I've done this in the past with no problems.

Has anyone ever used their sole proprietor EIN to process an individual tax payment?
Wouldn't recommend it. I guess if it's worth the risk, you can try it. if it doesn't get credited properly, sounds like it would be a pain to get it corrected.
czaj
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Re: Primer on Paying Taxes With a Credit Card

Post by czaj »

tj wrote: Mon Sep 13, 2021 11:12 am
czaj wrote: Mon Sep 13, 2021 10:22 am
kilowattcorn wrote: Mon Sep 13, 2021 9:54 am
czaj wrote: Mon Sep 13, 2021 9:38 am It seems that payUSAtax may be limiting the number of times you can use PayPal in a year. I just tried paying taxes using two Discover cards, but the PayPal option won't load for the second one.

When I change the social security number to be neither me or my wife's, it loads properly...
I've been struggling to resolve an issue with PayUSATax and the IRS (viewtopic.php?p=6191047&sid=1aa3e4ce90c ... c#p6191047). The IRS requires the credit card processors to send them only two payments per TIN per form.

The IRS has some other publicly disclosed limits (https://www.irs.gov/payments/frequency- ... ax-payment) but enforcement of this seems inconsistent.

It is also challenging to discuss multiple payments of the same amount for the same form with the IRS agents so it is helpful if the amounts you pay are distinct (e.g. $4999 and $5001 instead of $10000).
I understand the rules. I've done this in the past with no problems.

Has anyone ever used their sole proprietor EIN to process an individual tax payment?
Wouldn't recommend it. I guess if it's worth the risk, you can try it. if it doesn't get credited properly, sounds like it would be a pain to get it corrected.
I tried anyway. The IRS rejected the payment and I got a notification 2 months later. It wasn't a problem because I have already paid enough.
czaj
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Re: Primer on Paying Taxes With a Credit Card

Post by czaj »

Has anyone tried making a tax payment via the processors in February? I'd like to make a sizable tax payment in February 2022 for 2022. The dates the processors use on their sites are confusing. I'm fine making the payment for the current tax year and applying it to next year; but due to cash flow, I'd rather it be in February than January.

From Pay1040.com FAQ, it says 4th Quarter date range ends 01/01/22 instead of the due date:
Form 1040ES Estimated Tax - Tax Year 2021: 1st Quarter 03/01/21 - 05/15/21, 2nd Quarter 05/15/21 - 07/15/21, 3rd Quarter 07/15/21 - 10/15/21, 4th Quarter 10/15/21 - 01/01/22, 7 AM ET
For ACI, it looks like 2020 ended February 1:
For 1040-ES - Estimated Tax - Tax Year 2020, you can begin making payments on January 1, 2021, 12am Eastern Time. The program ends on February 1, 2021, 7am Eastern Time.

For 1040-ES - Estimated Tax - Tax Year 2021, you can begin making quarterly payments on the following dates:
● March 1, 2021, 9am Eastern Time through May 15, 2021, 7am Eastern Time.
● May 15, 2021, 7am Eastern Time through July 15, 2021, 7am Eastern Time.
● July 15, 2021, 7am Eastern Time through October 15, 2021, 7am Eastern Time
● October 15, 2021, 7am Eastern Time through January 1, 2022, 7am Eastern Time
EDIT: For some reason, it does not seem February payments are possible. Once the new year hits, it appears they change it so that January payments are applied to prior year, no activity allowed in February, and then March 1 for the current year.
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Re: Primer on Paying Taxes With a Credit Card

Post by psy1 »

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. An alternative is to send a large pre-payment to your credit card account so that it has a negative balance. For example, if your credit limit is $5000 you could send a pre-payment of $10,000 which effectively increases your credit limit to $15,000 for the purpose of paying taxes. I have done this many times for bot AMEX and Chase Visa cards. Ideally, you would obtain a new credit card for paying taxes so you could capture the signup bonus.
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Re: Primer on Paying Taxes With a Credit Card

Post by whodidntante »

For those looking for the credit card -> visa gift card route, giftcards.com is selling $250 VGCs for 5% off starting tomorrow. You can go through a cashback portal for extra profit. The processor will charge the lower debit card fee for paying taxes this way. I've also paid property taxes like this.
psy1
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Re: Primer on Paying Taxes With a Credit Card

Post by psy1 »

rich126 wrote: Tue May 18, 2021 2:44 pm I had a huge tax bill this year and put part of it (10%) on a card to get the sign up bonus. It didn't make sense with the nearly 2% fee to use a credit card to put the rest on a card. I could have signed up for more cards but I got plenty and currently more points than I can use. And while getting maybe 1.5 points on a chase card probably exceeds the 2% fee (since they can be redeemed for 1.5 cents or more and 1.5 * 1.5 > 2) it wasn't enough for me to do it. (didn't really want to pay now for more points that I won't use for a few years and their likely devaluation).

The remainder I just used a bank account transfer.
You might be wrong on the "not making sense to pay a 2% fee" depending on how you use your points. For example, if you use points by transferring them to airline partners of the credit card and then redeeming for an international business class ticket, then it is definitely worth it, even if you lose a little on the spread. The reason it can be worth it is that you need to generate large tranches of points in order to meet the threshold to obtain a ticket. For example, say you need 200,000 points for a particular ticket. You could take your time at 1X and spend $200,000. Or, you could spend $595 annual fee for an AMEX Platinum business card (120K sign on bonus), pay $53,000 in taxes for an additional 80k points at 1.5X, plus pay ~$980 in credit card fees. The net result is that you paid $1575 and can now get a 200K point international business class ticket that would likely cost much more that $1575. It might otherwise take a long time to spend $200,000 for those points.
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Re: Primer on Paying Taxes With a Credit Card

Post by tibbitts »

psy1 wrote: Thu Nov 25, 2021 8:44 pm
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. An alternative is to send a large pre-payment to your credit card account so that it has a negative balance. For example, if your credit limit is $5000 you could send a pre-payment of $10,000 which effectively increases your credit limit to $15,000 for the purpose of paying taxes. I have done this many times for bot AMEX and Chase Visa cards. Ideally, you would obtain a new credit card for paying taxes so you could capture the signup bonus.
You mean USmail a payment I'm guessing, since most cards won't accept online payments in excess of your balance. I didn't know what would happen if I sent in a larger amount. In the past I've had card issuers send back a balance after a very short time, without me asking for it. Also I'm not sure if all issuers will increase the credit limit when you have a negative balance, but I don't have experience with that.
psy1
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Re: Primer on Paying Taxes With a Credit Card

Post by psy1 »

tibbitts wrote: Thu Nov 25, 2021 9:00 pm
psy1 wrote: Thu Nov 25, 2021 8:44 pm
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. An alternative is to send a large pre-payment to your credit card account so that it has a negative balance. For example, if your credit limit is $5000 you could send a pre-payment of $10,000 which effectively increases your credit limit to $15,000 for the purpose of paying taxes. I have done this many times for bot AMEX and Chase Visa cards. Ideally, you would obtain a new credit card for paying taxes so you could capture the signup bonus.
You mean USmail a payment I'm guessing, since most cards won't accept online payments in excess of your balance. I didn't know what would happen if I sent in a larger amount. In the past I've had card issuers send back a balance after a very short time, without me asking for it. Also I'm not sure if all issuers will increase the credit limit when you have a negative balance, but I don't have experience with that.
If I submit an electronic payment from by brokerage checking account to a Chase or AMEX card account, they always accept the payment and that sometimes generates a negative balance. I do that intentionally when I want to make a large charge in excess of my limit. I have never had a card company decline acceptance of a payment.
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Re: Primer on Paying Taxes With a Credit Card

Post by tibbitts »

psy1 wrote: Thu Nov 25, 2021 9:20 pm
tibbitts wrote: Thu Nov 25, 2021 9:00 pm
psy1 wrote: Thu Nov 25, 2021 8:44 pm
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. An alternative is to send a large pre-payment to your credit card account so that it has a negative balance. For example, if your credit limit is $5000 you could send a pre-payment of $10,000 which effectively increases your credit limit to $15,000 for the purpose of paying taxes. I have done this many times for bot AMEX and Chase Visa cards. Ideally, you would obtain a new credit card for paying taxes so you could capture the signup bonus.
You mean USmail a payment I'm guessing, since most cards won't accept online payments in excess of your balance. I didn't know what would happen if I sent in a larger amount. In the past I've had card issuers send back a balance after a very short time, without me asking for it. Also I'm not sure if all issuers will increase the credit limit when you have a negative balance, but I don't have experience with that.
If I submit an electronic payment from by brokerage checking account to a Chase or AMEX card account, they always accept the payment and that sometimes generates a negative balance. I do that intentionally when I want to make a large charge in excess of my limit. I have never had a card company decline acceptance of a payment.
I'd guess that they wouldn't decline acceptance; I'm just not sure if that would increase the credit limit with all card issuers.
psy1
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Re: Primer on Paying Taxes With a Credit Card

Post by psy1 »

It does not increase the credit limit. It effectively increases the credit limit for the purpose of paying an amount of taxes that exceed your credit limit. The alternative of making multiple smaller payments, each time quickly paying off the credit card, is more tedious.
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Re: Primer on Paying Taxes With a Credit Card

Post by Prokofiev »

drk wrote: Thu Mar 18, 2021 8:02 pm
calwatch wrote: Thu Mar 18, 2021 5:26 pm Notably, unlike most other "manufactured spending", AMEX allows for tax payments to count toward a sign up bonus.
NB: Income tax payments are not manufactured spending. They are real spending. Amex also pays rewards on property tax payments and sales taxes associated with purchases.
What if I owe $1000 in taxes and pay $10,000 via CC and get a refund in March? Is THAT manufactured spend? I would vote yes.

If you have a B of A Amtrak card, you can now get 14-15% return thru year-end. The catch is you can only use the rebate toward
an Amtrak ticket and it is only for the first $1,000 of charges. But we have 4 separate cards = $150 x 4 = $600 -$80 fee = $520
Not bad . . .
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stupidkid
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Re: Primer on Paying Taxes With a Credit Card

Post by stupidkid »

psy1 wrote: Thu Nov 25, 2021 8:58 pm
rich126 wrote: Tue May 18, 2021 2:44 pm I had a huge tax bill this year and put part of it (10%) on a card to get the sign up bonus. It didn't make sense with the nearly 2% fee to use a credit card to put the rest on a card. I could have signed up for more cards but I got plenty and currently more points than I can use. And while getting maybe 1.5 points on a chase card probably exceeds the 2% fee (since they can be redeemed for 1.5 cents or more and 1.5 * 1.5 > 2) it wasn't enough for me to do it. (didn't really want to pay now for more points that I won't use for a few years and their likely devaluation).

The remainder I just used a bank account transfer.
You might be wrong on the "not making sense to pay a 2% fee" depending on how you use your points. For example, if you use points by transferring them to airline partners of the credit card and then redeeming for an international business class ticket, then it is definitely worth it, even if you lose a little on the spread. The reason it can be worth it is that you need to generate large tranches of points in order to meet the threshold to obtain a ticket. For example, say you need 200,000 points for a particular ticket. You could take your time at 1X and spend $200,000. Or, you could spend $595 annual fee for an AMEX Platinum business card (120K sign on bonus), pay $53,000 in taxes for an additional 80k points at 1.5X, plus pay ~$980 in credit card fees. The net result is that you paid $1575 and can now get a 200K point international business class ticket that would likely cost much more that $1575. It might otherwise take a long time to spend $200,000 for those points.
Even if you don't transfer points and don't get a sign up bonus, and just buy airline tickets directly using points in the Amex travel portal you come out ahead. You earn slightly less than 1.5x because they charge the tax payment fee separately and you're not likely to exceed $5k in fees, so only 1x on that part. You redeem at 1.54 cents per point with the biz platinum. You come out around a 2.3% return, slightly more than the tax fee. Basically buying discounted tickets, plus the nominal interest on the float, not much these days but has been good in the past. Though you need to pay enough in taxes to offset the annual fee with the .33% return or value the platinum card enough to pay for it.
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