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Paying USA income, property or other taxes with a credit card

Old Mar 18, 2016, 8:54 am
FlyerTalk Forums Expert How-Tos and Guides
Last edit by: Boraxo
There are three services to pay your U.S. federal taxes: IRS Pay Your Taxes by Debit or Credit Card or Digital Wallet

pay1040.com 1.87% fee on credit (lowered from 1.99% on 01/02/2023). $2.50 flat fee on debit.
payUSAtax.com - 1.82% fee on credit (rate updated 01/03/2024 from 1.85%). $2.20 flat fee on debit.
See this thread about payUSAtax customer service. Many people have reported that they never respond to support requests.
ACI Payments, Inc - 1.98% fee on credit. $2.20 flat fee on debit.

Many states also permit online tax payment; check with your state or this list from MasterCard.

The IRS has a system to view payments, and it's good practice to confirm all payments within a short time frame, so that any rare lost payment issue can be disputed.
Be mindful of time zones if paying on the due date as pay1040.com uses CDT timestamp and payusatax.com uses EDT timestamp.

In general, you're allowed 2 payments per processor above per type of tax (annual and quarterlies being 2 different types, for example). They're not billed as cash advance fees. If 6 payments is not enough to pay your bill you can use a service such as plastiq (2.25% fee). If making multiple payments, it is advised you join here to track your payments link , you will be required to give your banking information and will receive a pin via snail mail
(Confirmed 4/2018 in post #429)

Fees are tax-deductible for C-Corps but not individuals (2018 tax reform eliminated "miscellaneous itemized deductions"). The majority of people will not be able to deduct that expense, check with your accountant.

When making multiple payments at or near your credit limit multiple times, allow yourself 3-5 days between payments for the charge to show up on your card and your bank payment to clear. If you wait until April 15th to make payments, you will only be able to clear the first payment.

Best Credit Cards to use/buy cheap points:
- Any credit card to hit minimum spend and achieve signup bonus or spend thresholds.
- BOA Premium Rewards 2.62% Cashback (Card holder needs to be a Preferred Rewards Platinum Honors member)
- Chase INK Premier 2.5% Cashback on purchases over $5k (Points are not transferable to airline or hotel programs)
- Capital One Venture X 2X Cap One Miles/Points (now transfer to most airline partners at 1:1)
- Amex Blue Business Plus 2X Membership Rewards (capped at $50,000 spend per calendar year)
- Chase United Business Club Card, 1.5X United Miles
- BOA Virgin Atlantic World Elite 1.5X Virgin Atlantic Points
- Chase Freedom Unlimited, 1.5X Ultimate Rewards, paired with a premium card (Sapphire Preferred, Sapphire Reserve, INK Preferred, INK Plus)
- Chase INK Unlimited, 1.5X Ultimate Rewards, paired with a premium card (Sapphire Preferred, Sapphire Reserve, INK Preferred, INK Plus)
- Amex Everyday Preferred 1.5X Membership Rewards, (need to make 30 transactions in a month for 50% bonus)
- Amex Business Platinum 1.5X Membership Rewards on purchases over $5K

Big Spend Bonuses:
- Amex Delta Reserve, spend $60k get 30k bonus miles and 30k MQM
- Citi Hilton HHonors Reserve, spend $10k get free weekend night, $40k, Platinum Status
- Chase Southwest, spend $135k get Companion Pass (WN points are redeemed at $.011, @ 1.87% fee, you're essentially buying the companion pass for $847)
- Chase Ritz Carlton Reserve, spend $10k get Gold Status spend $75k get Platinum Status
- Chase World of Hyatt, spend $15k get one free night

Cash Back cards:
Elan Fidelity 2%
Citi Double Cash 2%

Earn Status/Elite qualifying points:
- American, Delta, Alaska, Hyatt

Pre-Funding allowed:
Amex Charge Cards

Pre-Funding not-allowed:
Chase

Quarterly tax due dates: the 15th of April, June, September, January


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Paying USA income, property or other taxes with a credit card

Old Mar 26, 2014, 11:07 am
  #226  
 
Join Date: Sep 2011
Posts: 187
Generally CC for taxes isn't a good deal. Most providers that allow this will charge 2%+, offsetting any reward you may gain. A better way would be to use some MS techniques to convert your credit spend into debit spend, which is much cheaper (but time consuming).

The only time using a CC MAY make sense is if you're trying to hit some type of min spend from a CC (either large spend bonus or signup bonuses). In that case you're basically buying miles/points and will need to make the decision yourself whether it is worth it or not. Is hitting the spend for XXXX bonus worth ~$690 (assuming 30k tax)??
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Old Mar 26, 2014, 12:42 pm
  #227  
 
Join Date: Feb 2014
Programs: UA Plat, SPG Gold, Marriott Gold
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Originally Posted by cornellfOo
Generally CC for taxes isn't a good deal. Most providers that allow this will charge 2%+, offsetting any reward you may gain. A better way would be to use some MS techniques to convert your credit spend into debit spend, which is much cheaper (but time consuming).

The only time using a CC MAY make sense is if you're trying to hit some type of min spend from a CC (either large spend bonus or signup bonuses). In that case you're basically buying miles/points and will need to make the decision yourself whether it is worth it or not. Is hitting the spend for XXXX bonus worth ~$690 (assuming 30k tax)??
Just curious.... why $690? That's 2.3%. Is that the typical fee?
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Old Mar 26, 2014, 1:04 pm
  #228  
 
Join Date: Sep 2011
Posts: 187
Sorry I wasn't clear-that number was off the top of my head. It is the fee that my local property tax collector charges so I just went with it. According to this page on IRS.gov[1], certain operators can get that fee down to ~1.87%. Same decisions still apply, though-is it worth the ~$561 cost?

[1] http://www.irs.gov/uac/Pay-Taxes-by-...-or-Debit-Card

Last edited by cornellfOo; Mar 26, 2014 at 1:05 pm Reason: formatting
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Old Mar 26, 2014, 1:45 pm
  #229  
 
Join Date: Feb 2014
Programs: UA Plat, SPG Gold, Marriott Gold
Posts: 677
Originally Posted by cornellfOo
Sorry I wasn't clear-that number was off the top of my head. It is the fee that my local property tax collector charges so I just went with it. According to this page on IRS.gov[1], certain operators can get that fee down to ~1.87%. Same decisions still apply, though-is it worth the ~$561 cost?

[1] http://www.irs.gov/uac/Pay-Taxes-by-...-or-Debit-Card
Thanks

The other consideration is the 1.5 month float on the $30K. Not worth a whole lot given the extremely low interest rates out there, but assuming a 1% annual rate, its $37.50. Gets the cost down to $524 or so for 45,000 UA miles, or 1.2 cpm if I go that route.

Or I could just use the 2% cash back FIA Amex and make a straight profit of $76 in cash.

Sorry. I tend to be a tad bit anal.....
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Old Apr 6, 2014, 10:05 am
  #230  
 
Join Date: Jul 2003
Location: MSY
Posts: 256
CITI AA to buy Prepaid Debit to save fees to pay taxes?

I'm thinking of applying for the AA CITI 100K offer and just realized that the minimum spending would be just about covered by our upcoming tax payment.

The lowest fee would be 1.87% or $187. Seems the debit card fee is less.

Can I buy prepaid debit cards with the AA CITI card? I'd then meet the minimum for the 100K offer AND save the 1.87% fee?

I've always paid taxes with a check but seems silly to throw away the opportunity to immediately meet the min spending.

No finance charge for the balance as I'd pay that off immediately.

Thoughts?

Jen
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Old Apr 7, 2014, 12:55 pm
  #231  
 
Join Date: Mar 2007
Location: S Cal
Programs: AA Lifetime Plat, United Silver, Marriott Plat, IHG Plat
Posts: 1,142
Yes, you could likely buy prepaid debit cards with your credit card and use those to pay taxes. BUT there is a big BUT.

It sounds like you are looking to make a large tax payment. Prepaid debit cards generally come in denominations up to $500. There are 3 websites that will accept debit card payments for taxes, but each website limits you to 2 online payments. So you could pay up to 500 x 6 = $3000 in taxes this way (less the fees for using a debit card). You've still got a long way to go to meet your required spend on your AA card, but at least you've made a dent in it.

One of the websites that accepts online payments will possibly accept additional payments (more than 2) if you phone. I did try phoning, but gave up after I seemed to be on interminable hold. Perhaps your patience is greater than mine.

Frequent miler posted a basic primer on paying taxes by credit card today: http://boardingarea.com/frequentmile...part-1-primer/
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Old Apr 7, 2014, 1:03 pm
  #232  
mia
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Posts: 49,210
Originally Posted by jelliott04
The lowest fee would be 1.87% or $187. Seems the debit card fee is less.

Can I buy prepaid debit cards with the AA CITI card? I'd then meet the minimum for the 100K offer AND save the 1.87% fee?
What fees would you incur to buy the debit cards?
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Old Apr 7, 2014, 1:20 pm
  #233  
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Right - what mia said, plus the flat fee per payment to use the debit card of at least $2.49 plus you at probably about 1.5% to go the debit card route.

http://www.irs.gov/uac/Pay-Taxes-by-...-or-Debit-Card

Then there's the pain of the whole thing versus the one-shot transaction just using your cc right on the payment website.
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Old Apr 12, 2014, 7:56 am
  #234  
 
Join Date: Aug 2012
Location: SEA
Programs: Bonvoy Gold
Posts: 1,956
I read the primers and could use some feedback on whether this seems to be an OK plan. My travel goal involves getting about 200k more AA miles in the by summer.

I have to pay more than expected for Federal for 2013, State for 2013, and quarterly estimates for 2014 starting on April 15th.

My plan is to split the payments across a few CCs and use PayUSAtax.com at 1.87%. I do not have a point-earning Debit Card, my BB accounts are drained, and BP from my Tmo account isn't trustworthy enough.

Barclay Arrival: Place most here since it's 2:1 for all payments, and I have some upcoming travel costs that I can "redeem for travel."

AMEX SPG: Combined with previous spending in 2014, place enough here to meet the 30k annual spend for SPG Gold. Convert SPG to AAmiles at 1:1.25.

AA Citi Exec: Combined with previous spending in 2014, place enough here to qualify for the 100k miles. Probably won't hit (or need) the $40k to qualify for 10k EQM.


Seem reasonable?
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Old Apr 12, 2014, 9:36 am
  #235  
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Only the third one makes sense to me. On the first, you make very little - around .3%, depending on how you calc the Barclay points. Granted, it is more than zero.

On the SPG, you're spending almost 1.5 cents per mile, assuming you hit the 20k right on (or have other SPG to facilitate hitting it right on). That might be ok, if you are 100% certain you can redeem for more. Summer travel + AA + recent changes may make that tough.
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Old Apr 12, 2014, 9:56 am
  #236  
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Thinking more about Barclays here, there's a risk that the transaction won't generate points (they say not on "Quasi-Cash Transactions" and they may consider this to be that). I haven't seen a data point on that front.
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Old Apr 12, 2014, 7:50 pm
  #237  
 
Join Date: Aug 2012
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Originally Posted by josephstern
Only the third one makes sense to me. On the first, you make very little - around .3%, depending on how you calc the Barclay points. Granted, it is more than zero.

On the SPG, you're spending almost 1.5 cents per mile, assuming you hit the 20k right on (or have other SPG to facilitate hitting it right on). That might be ok, if you are 100% certain you can redeem for more. Summer travel + AA + recent changes may make that tough.
Good point about Barclay potentially classifying this as a cash advance. Hadn't considered that possibility. In speaking with the CSR, itís the merchantís call, so I'll be sure to ask how it will be coded. Regarding SPG, I'd be redeeming 20 SPG to 25k AA and then using the AA miles on EY. The rate for getting ~25k miles is worthwhile since it would (hopefully) be the difference between Biz and F on a long-haul. (My post was confusingóIím aiming to redeem miles this summer, but for widely available non-x-mas winter flights.)
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Old Apr 14, 2014, 3:28 pm
  #238  
 
Join Date: Apr 2013
Posts: 71
Thanks to all the useful posts in this thread.

First time paying estimated quarterly taxes. (1040 ES)

Used OneVanilla cards. Used multiple payment processors to get around 2 payment limit.

Unfortunately do not have enough to pay to have to call anyone.
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Old Apr 14, 2014, 8:19 pm
  #239  
 
Join Date: Oct 2010
Location: Feeder Band Land (South FL)
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Posts: 873
> Used multiple payment processors to get around 2 payment limit.

IME, most processors have no limit on #cc's when paying by phone,
only when paying online...

> I read the primers

Primers?? Link please! Thanks!

> CC - too expensive

Is ~$325 too expensive for an international busn class rt???!!!
citi AA Exec = $450-$200+$187=$437x(~.75 tax deduction later) = ~$325 for 110K AA miles
I THINK NOT! PASS ME THE $325-INT'L-BUSN-RT'S PLEASE...^ :-: ^ :-: ^

PS. just confirmed with Barclay Arrival that tax pay = regular spending

Last edited by TravelPhotographer; Apr 16, 2014 at 6:28 pm
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Old Apr 16, 2014, 1:25 pm
  #240  
 
Join Date: Feb 2009
Posts: 147
I just paid about $4k in federal taxes using the Citi AA. I figured it was worth it, with the 1.87% fee being deductible.

Then I finally registered the card online to see how much we've charged (our first statement hasn't cut yet), and the wife has already spent another $4k on it! So, it turns out i didn't need the tax payment to hit the $10k spend...

I asked the wife last night wth she has been buying, and she replied "You told me to use the card for everything I could!". Evidently she went on a maternity clothing shopping spree (we have a baby due this summer)...
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