Primer on Paying Taxes With a Credit Card

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Gadget
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Re: Primer on Paying Taxes With a Credit Card

Post by Gadget »

moneyflowin wrote: Fri Apr 29, 2022 10:10 pm For those who made estimated payments for TY2021 with the three CC payment providers, have your payments shown up on your IRS payment activity page?
Mine is still listed as pending, and my tax amount still doesn't show up on the IRS login as having been processed.

That said, I received my refund already... I'm still waiting on the I Bonds.
moneyflowin
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Re: Primer on Paying Taxes With a Credit Card

Post by moneyflowin »

Gadget wrote: Sat Apr 30, 2022 9:33 am
moneyflowin wrote: Fri Apr 29, 2022 10:10 pm For those who made estimated payments for TY2021 with the three CC payment providers, have your payments shown up on your IRS payment activity page?
Mine is still listed as pending, and my tax amount still doesn't show up on the IRS login as having been processed.

That said, I received my refund already... I'm still waiting on the I Bonds.
At least yours are pending... My 1040ES payments still haven't shown up as pending after many months.
BundyBundy
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Re: Primer on Paying Taxes With a Credit Card

Post by BundyBundy »

Hi All - great thread! I read thru the whole thread and just wanted to understand the process more. Apologies for any noob questions...

1) What the difference between 1040ES vs 4868 payments?
a. What is the purpose of the extension – to give extra time to pay taxes?
b. Are people paying taxes with their CC mainly as a W2 or business owner/independent contractor?
c. Can you just do a large 1 or 2-time lump sum payments instead of the quarterly payments?
i. Why does the quarterly payments matter? Why can’t you pay everything in Q4? Is it to prevent getting penalized?

2) How do you make sure you meet the safe harbor and not pay any penalties? Do you pay 100-110% of last year taxes?

3) How does state taxes work? I live in California.

Steps for tax payments with credit/debit/gift cards
1) Increase W2 withholding to decrease tax withholdings
2) Make quarterly payment to Federal/state government with credit/debit/gift cards
3) Check payment went thru IRS/state websites (https://www.irs.gov/payments/your-online-account)
4) Input into tax software as 1040 ES payments

Any I am missing anything? Thank you so much for the clarification.
CharlieM
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Re: Primer on Paying Taxes With a Credit Card

Post by CharlieM »

If you own a pass through business with the income flowing to your individual tax return does anyone know if you can deduct the fees associated with your credit card tax payments? From my understanding businesses can deduct these fees but not individuals, but I’m curious how it works for owners of pass through entities that have owners pay taxes at the individual level. Any insights appreciated!
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dual
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Post by dual »

a. What is the purpose of the extension – to give extra time to pay taxes?
as the name implies, with an extension you get extra time to file but not to pay your balance due on your taxes. You have to pay the balance due by April 15, give or take a few days depending on the weekends, holidays etc.

on the topic of this thread, you can use the extension to file option at online payment websites to pay the balance due on your return with a credit card and avoid the extra fees imposed by your tax program, such as TurboTax. wait a few days for the payment to clear the IRS, then enter the payment with extension to your tax program so that the balance due is zero. Then you can e-file your return without paying additional fees to TurboTax.

Edit. You still have to pay the fees of the online payment website like pay1040.com. But those are typically lower than TurboTax Turbo tax fees.
international001
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Re:

Post by international001 »

dual wrote: Sun May 08, 2022 11:35 am
a. What is the purpose of the extension – to give extra time to pay taxes?
as the name implies, with an extension you get extra time to file but not to pay your balance due on your taxes. You have to pay the balance due by April 15, give or take a few days depending on the weekends, holidays etc.

on the topic of this thread, you can use the extension to file option at online payment websites to pay the balance due on your return with a credit card and avoid the extra fees imposed by your tax program, such as TurboTax. wait a few days for the payment to clear the IRS, then enter the payment with extension to your tax program so that the balance due is zero. Then you can e-file your return without paying additional fees to TurboTax.

Edit. You still have to pay the fees of the online payment website like pay1040.com. But those are typically lower than TurboTax Turbo tax fees.
How do you know how much to pay if you don't file?
What TurboTax fees? Usually I just pay 1040 fees (~3%)
tashnewbie
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Re: Re:

Post by tashnewbie »

international001 wrote: Mon May 09, 2022 2:56 am
dual wrote: Sun May 08, 2022 11:35 am
a. What is the purpose of the extension – to give extra time to pay taxes?
as the name implies, with an extension you get extra time to file but not to pay your balance due on your taxes. You have to pay the balance due by April 15, give or take a few days depending on the weekends, holidays etc.

on the topic of this thread, you can use the extension to file option at online payment websites to pay the balance due on your return with a credit card and avoid the extra fees imposed by your tax program, such as TurboTax. wait a few days for the payment to clear the IRS, then enter the payment with extension to your tax program so that the balance due is zero. Then you can e-file your return without paying additional fees to TurboTax.

Edit. You still have to pay the fees of the online payment website like pay1040.com. But those are typically lower than TurboTax Turbo tax fees.
How do you know how much to pay if you don't file?
What TurboTax fees? Usually I just pay 1040 fees (~3%)
I prepared a tax return, but didn't file, so I knew how much I would owe (or likely would owe) and paid that. I did an extension because I wanted to buy I bonds and the payments I'd made wouldn't be processed by the original filing deadline, and in general, I just didn't want to be rushed. If you're still waiting on certain paperwork and think your tax liability might change, it might make sense to add a buffer to the payment you make to account for that possibility.
tananaev
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Re: Primer on Paying Taxes With a Credit Card

Post by tananaev »

There's a new good card option for paying taxes - PayPal credit card. It's a flat 2% cashback card on everything, but recently they've added 3% on PayPal. Some IRS payment providers allow PayPal, so you effectively get a bit more than 1% back.

You also get that cashback almost immediately without any minimum. That's probably the best card now for people who like simplicity and just want to use the same card for everything.
MisterBill
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Re: Primer on Paying Taxes With a Credit Card

Post by MisterBill »

BundyBundy wrote: Thu May 05, 2022 3:53 pm i. Why does the quarterly payments matter? Why can’t you pay everything in Q4? Is it to prevent getting penalized?
Your questions are really out of the purview of this thread, but I'll just answer this one. Taxes are due when the money is earned. When doing your taxes, you may incur a penalty if you do not pay your taxes throughout the year.

I found this on another site, which I'm not going to link to here since it's a competitor finance site:

The IRS will charge penalties if you didn’t pay enough tax throughout the year. The IRS can charge you a penalty for late or inadequate payments even if you're due a refund when you file your tax return.
MisterBill
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Re: Primer on Paying Taxes With a Credit Card

Post by MisterBill »

tananaev wrote: Mon May 09, 2022 9:12 am There's a new good card option for paying taxes - PayPal credit card. It's a flat 2% cashback card on everything, but recently they've added 3% on PayPal. Some IRS payment providers allow PayPal, so you effectively get a bit more than 1% back.

You also get that cashback almost immediately without any minimum. That's probably the best card now for people who like simplicity and just want to use the same card for everything.
Not bad, but no signup bonus. I already get 2.625% from BofA Premium Rewards card, so I'll stick with that.
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dual
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Re: Primer on Paying Taxes With a Credit Card

Post by dual »

How do you know how much to pay if you don't file?
What TurboTax fees? Usually I just pay 1040 fees (~3%)
You can use TurboTax to estimate your tax by filling in your income and any obvious deductions. Otherwise you can make a WAG ( wild ass guess). There is a penalty if you underpay the tax when you file the extension.

Not sure what you mean by 1040 fees. If you mean the fees charged by credit card payment companies, it is less than 3%. Pay1040.com charges 1.875% iirc.

If you mean the fee TurboTax charges to pay by credit card when you efile the return, I have never paid with TurboTax but my recollection is the fee is greater than pay1040. Maybe that is the 3% you are referring to? If so, you can see the motivation for paying at pay1040 with extension.
BundyBundy
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Re: Primer on Paying Taxes With a Credit Card

Post by BundyBundy »

MisterBill wrote: Mon May 09, 2022 11:17 pm
BundyBundy wrote: Thu May 05, 2022 3:53 pm i. Why does the quarterly payments matter? Why can’t you pay everything in Q4? Is it to prevent getting penalized?
Your questions are really out of the purview of this thread, but I'll just answer this one. Taxes are due when the money is earned. When doing your taxes, you may incur a penalty if you do not pay your taxes throughout the year.

I found this on another site, which I'm not going to link to here since it's a competitor finance site:

The IRS will charge penalties if you didn’t pay enough tax throughout the year. The IRS can charge you a penalty for late or inadequate payments even if you're due a refund when you file your tax return.
thank you!
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Halfvolley
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Re: Primer on Paying Taxes With a Credit Card

Post by Halfvolley »

calwatch wrote: Tue Apr 19, 2022 12:53 am
https://www.pay1040.com/TaxPayerTools/F ... dQuestions
Form 4868 Automatic Extension of Time to File - Tax Year 2021: 01/01/22 - 04/19/22, 7 AM ET
Form 1040ES Estimated Tax - Tax Year 2021: 01/01/22 - 02/01/22, 7 AM ET
Form 1040ES Estimated Tax - Tax Year 2022: 1st Quarter 03/01/22 - 05/15/22, 2nd Quarter 05/15/22 - 07/15/22, 3rd Quarter 07/15/22 - 10/15/22, 4th Quarter 10/15/22 - 01/01/23, 7 AM ET
How do these dates align with the due dates posted on the IRS website? If I make an estimated payment on 5/14 through Pay1040, have I missed the first payment period deadline of the IRS?

(https://www.irs.gov/faqs/estimated-tax/ ... ividuals-2).

Payment Period 1/1 - 3/31: Due Date 4/15
Payment Period 4/1 - 5/31: Due Date 7/15 6/15
Payment Period 6/1 - 8/31: Due Date 9/15
Payment Period 9/1 - 12/31: Due Date 1/15
Last edited by Halfvolley on Tue May 17, 2022 4:38 pm, edited 1 time in total.
SnowBog
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Re: Primer on Paying Taxes With a Credit Card

Post by SnowBog »

Halfvolley wrote: Tue May 17, 2022 10:17 am
calwatch wrote: Tue Apr 19, 2022 12:53 am
https://www.pay1040.com/TaxPayerTools/F ... dQuestions
Form 4868 Automatic Extension of Time to File - Tax Year 2021: 01/01/22 - 04/19/22, 7 AM ET
Form 1040ES Estimated Tax - Tax Year 2021: 01/01/22 - 02/01/22, 7 AM ET
Form 1040ES Estimated Tax - Tax Year 2022: 1st Quarter 03/01/22 - 05/15/22, 2nd Quarter 05/15/22 - 07/15/22, 3rd Quarter 07/15/22 - 10/15/22, 4th Quarter 10/15/22 - 01/01/23, 7 AM ET
How do these dates align with the due dates posted on the IRS website? If I make an estimated payment on 5/14 through Pay1040, have I missed the first payment period deadline of the IRS?

(https://www.irs.gov/faqs/estimated-tax/ ... ividuals-2).

Payment Period 1/1 - 3/31: Due Date 4/15
Payment Period 4/1 - 5/31: Due Date 7/15
Payment Period 6/1 - 8/31: Due Date 9/15
Payment Period 9/1 - 12/31: Due Date 1/15
Yes.

And the 2nd one is oddly due by 6/15 — not 7/15 as you have listed...

If you owe state taxes, you'll want to understand their dates as well (Hopefully they match the feds.)

I mistakenly paid my 2nd quarter estimate to my state before 7/15 (but after 6/15). I ended up owing a penalty as a result. Not the end of world, but easily avoidable.
calwatch
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Re: Primer on Paying Taxes With a Credit Card

Post by calwatch »

Payment period below refers to the taxes for the amount earned during that period (if you choose the annualized income method for estimated tax penalty). This differs from the periods when the processors will accept payments. In essence, those are the dates when the counter on the two payments reset and two more payments can be made. I have no idea why they do it that way.
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