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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 Jan 20, 2013, 10:49 am
  #31  
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Originally Posted by pkoo
as I try to put more recurring bills on my card like my monthly rent, which isn't payable by credit card.
You are in a thread about paying taxes with a credit card.

See these threads for techniques for paying rent:

http://www.flyertalk.com/forum/miles...nt-online.html

http://www.flyertalk.com/forum/miles...e-tuition.html
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Old Jan 21, 2013, 5:06 pm
  #32  
 
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So what box on my federal return do I count the money I paid? I selected Pay your 1040 Balance Due on the paytaxusa site. Thanks!
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Old Jan 22, 2013, 10:59 am
  #33  
 
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In a post in a thread closed and referred to this one, someone asked the usual question "Is it worth paying the fees to pay my taxes with a credit card?"

Not a simple question. Let me answer.

Most of the time, probably not. Most people would value most points between about 1.5 and 2.0 cents per point. Payment fees are toward the top end of that range.

However there can be a lot of exceptions.

1) If you need a defined number of miles for an award and happen to have the appropriate credit card, it can be worth it compared to buying them from the airline. But you will have to wait for the miles to clear, and the award you want might not be available by then.
2) If you are regularly buying tickets that cost more than 2 cents per mile and are available as award tickets, and don't have enough miles other ways. If you were about to run out and buy a business class overseas ticket for $4, $6, $8 thousand, and you're sure it will be available in a month, and you can get it for 100K or 150K miles, it's worth paying $2k or $3K in fees.
3) If you're trying to meet a minimum spend requirement to get a signup bonus on a credit card and have no other way to meet it. Taken totally in isolation, of course you would pay $60 in fees to charge $3000 on a Chase Sapphire Preferred card and get 43,000 points, worth at least 1 cent each and often more.
4) If you have ways to leverage the spend. Some people buy gift cards at office supply stores and get 5x points on a Chase Ink Bold card. Some have debit cards that award points they can use to pay credit card bills, so they get not only the original points but the debit card points.
5) If you can deduct the credit card fees. I'm not a tax expert, so take this with a grain of salt, but I think they are deductible only if (a) you use them to pay business taxes or (b) they are part of the miscellaneous deductions subject to the 2% threshold. Even then, it is possible the points should be considered taxable income, although the IRS pretty much has a hands-off policy on taxing points unless they are a bonus for opening a bank account.
6) If you have a debit card giving points, and can pay in large enough chunks, it's kind of a no-brainer. If you could pay a $5000 tax bill for a $4 fee and get 5000 points, that's clearly a win.
7) If you have only a modest supply of points, and you feel better about having enough for emergencies. I like to tell the story about a woman I really liked telling me that she suddenly had 5 days off she hadn't expected, and how she complained bitterly about the supervisors who had scheduled her time off so clumsily. By the time she was done venting, I had checked and found a 25,000 mile award ticket for the next morning that would have cost me $2,000 to buy. We had such a good time at that surprise meeting that a year and a half later she married me. I'm not saying we wouldn't have gotten married if I hadn't had a cache of miles, but it can't hurt. If you don't have another source of miles, just having them around might make you able to get redemptions worth much better than the 1.5-2 cents per mile guideline I gave earlier.

Speaking as someone who now works overseas and does not have taxes withheld, I will have to pay mid 5-figure estimated taxes, and I personally will use one or more of these strategies. I think if you are someone already deeply into the points/miles game, you will find a way to leverage your spend, and the information in this thread it useful. If you're not, then I probably wouldn't pay the fees just to see your balance creep up.
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Old Jan 22, 2013, 11:09 am
  #34  
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Originally Posted by redtop43
...Most people would value most points between about 1.5 and 2.0 cents per point.
In addition to the circumstances mentioned in your post, don't fall into the trap of assuming that each dollar earns only one mile or point. There are cards which generate 1.25 to 1.5 miles per dollar for general spending, and Citi ThankYou cards with the Flight Points feature generate two points per dollar. (ThankYou points are worth $0.0133 each if you have a qualifying card, which means a 2.66% yield.)

Last edited by mia; Jan 22, 2013 at 11:45 am
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Old Jan 22, 2013, 11:30 am
  #35  
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Seems like a no-brainer to me to use one of my hotel amexes or perhaps the BA Visa. Each dollar would yield well above the fee paid...and these are reward accounts that I "turn over" pretty quickly. e.g., The miles/points earned on a tax payment in March 2013 would likely be monetized as a hotel stay or airline flight by 2014.
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Old Jan 22, 2013, 11:48 am
  #36  
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Originally Posted by pinniped
Seems like a no-brainer to me to use one of my hotel amexes or perhaps the BA Visa. Each dollar would yield well above the fee paid...and these are reward accounts that I "turn over" pretty quickly. e.g., The miles/points earned on a tax payment in March 2013 would likely be monetized as a hotel stay or airline flight by 2014.
Agreed. SPG Amex would be particularly valuable. Also, Fidelity 2% card. You'd be making a cash profit on the latter!

Mike
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Old Jan 23, 2013, 3:36 pm
  #37  
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Originally Posted by redtop43
In a post in a thread closed and referred to this one, someone asked the usual question "Is it worth paying the fees to pay my taxes with a credit card?"

Not a simple question. Let me answer.
A good summary above to which I would add a couple more points:

(8) If you can't afford to pay your taxes but want to charge rather than rack up penalties or interest. Depending on the timing of the charge and statement, you can get almost 2-month grace period before interest begins to accrue. And you can then extend that longer by doing a 0% balance transfer to another card. Obviously this will cost more than paying the tax due with cash or perhaps paying the lower IRS penalty+interest, but at least you get miles and don't have to worry about US government breathing down your neck.

(9) If you need to spend to reach a particular target, such as $30k BA-Chase to get the 2-for-1 cert (which doubles the value of your BA miles) or $40k Citi Hilton for HH Diamond status. I find the value (for BA) easily outweighs the 2% fee, particularly if I don't have other qualifying spend (or want to allocate that to different cards).
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Old Jan 24, 2013, 9:47 am
  #38  
 
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Originally Posted by nic3456
So what box on my federal return do I count the money I paid? I selected “Pay your 1040 Balance Due” on the paytaxusa site. Thanks!
There is no "box" on your Federal tax return to check when you are simply paying your balance due. Just enter the amount you owe on Form 1040, line 76. The IRS will receive the payment info from the company you used to pay your tax and post the payment to your account.

Last edited by DCBob; Jan 25, 2013 at 7:45 am
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Old Jan 27, 2013, 6:38 am
  #39  
 
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For those of us with tax bills in tens of thousands, buying $500 GCs is impractical, but $3K AmEx prepaid may be OK.

Does anyone know if AmEx gift cards are classified as debit or credit?
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Old Jan 27, 2013, 8:38 am
  #40  
 
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Originally Posted by stevento
Does anyone know if AmEx gift cards are classified as debit or credit?
I used an AmEx gift card to pay a portion of my Federal estimated taxes due in January 2013. It processed as credit (with a fee over 2%). So for me, it is only practical to do this when a site such as Big Crumbs has a large enough rebate to cover most of the cost of AmEx gift card purchases.
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Old Jan 27, 2013, 9:19 am
  #41  
 
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What if you pay estimated taxes with an extension request and wind up with a refund due later? Does the IRS refund back to the credit card and leave you without the points or does the agency cut you a check or direct deposit like any other refund?

Assuming the answer to the question above is that the IRS sends the refund through the usual channels, couldn't you overpay your estimated taxes with an extension form, then file your taxes a couple days late and have the IRS send the refund to your bank via direct deposit, and then pocket the points from the overpayment? Obviously that wouldn't be worth it in most situations because you pay the almost 2% fee to payusatax, but if you secure a new card with a substantial spend threshold to meet for a big sign up bonus (like, for example, the current offer for an AMEX Gold Business card with 75K membership rewards points for $10K spent in 4 months), it seems like a couple hundred bucks to pass $10K through the IRS for a few weeks could be worth it.
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Old Jan 28, 2013, 8:53 am
  #42  
 
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Originally Posted by GatorBlues
What if you pay estimated taxes with an extension request and wind up with a refund due later? Does the IRS refund back to the credit card and leave you without the points or does the agency cut you a check or direct deposit like any other refund?

Assuming the answer to the question above is that the IRS sends the refund through the usual channels, couldn't you overpay your estimated taxes with an extension form, then file your taxes a couple days late and have the IRS send the refund to your bank via direct deposit, and then pocket the points from the overpayment? Obviously that wouldn't be worth it in most situations because you pay the almost 2% fee to payusatax, but if you secure a new card with a substantial spend threshold to meet for a big sign up bonus (like, for example, the current offer for an AMEX Gold Business card with 75K membership rewards points for $10K spent in 4 months), it seems like a couple hundred bucks to pass $10K through the IRS for a few weeks could be worth it.
The IRS doesn't even know the credit card number. It gets paid electronically by the 3rd party payment processor, so ALL IRS refunds are by check or direct deposit to a bank account. I would NEVER pay 1.89% in convenience fees for points or mileage, especially when you can use a SunTrust SkyMiles Debit Card to pay your Federal income tax for a flat fee of $3.49 at payUSAtax.com. I once did this to get 41K in SkyMiles for a flat fee of $3.49. That's a steal! Note that there is nothing to stop you from overpaying your estimated tax - you will get the excess money back when you file your tax return.
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Old Jan 28, 2013, 10:24 am
  #43  
 
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Just booked 2 CX F JFK to BKK over the holidays with points used from paying my taxes and sign up bonuses. Retail value was $52k. I paid a few thousand in credit card fees but totally worth it.
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Old Jan 28, 2013, 12:47 pm
  #44  
 
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Originally Posted by DCBob
The IRS doesn't even know the credit card number. It gets paid electronically by the 3rd party payment processor, so ALL IRS refunds are by check or direct deposit to a bank account. I would NEVER pay 1.89% in convenience fees for points or mileage, especially when you can use a SunTrust SkyMiles Debit Card to pay your Federal income tax for a flat fee of $3.49 at payUSAtax.com. I once did this to get 41K in SkyMiles for a flat fee of $3.49. That's a steal! Note that there is nothing to stop you from overpaying your estimated tax - you will get the excess money back when you file your tax return.
Very helpful information. Thanks. I would ordinarily agree with you about not paying a credit card fee, but paying $200 to rack up a $10,000 spend on my new AMEX will net me 75,000 membership reward points. That's worth it in my view.

Last edited by GatorBlues; Jan 28, 2013 at 12:58 pm
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Old Jan 28, 2013, 12:50 pm
  #45  
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Originally Posted by DCBob
The IRS doesn't even know the credit card number. It gets paid electronically by the 3rd party payment processor, so ALL IRS refunds are by check or direct deposit to a bank account. I would NEVER pay 1.89% in convenience fees for points or mileage, especially when you can use a SunTrust SkyMiles Debit Card to pay your Federal income tax for a flat fee of $3.49 at payUSAtax.com. I once did this to get 41K in SkyMiles for a flat fee of $3.49. That's a steal! Note that there is nothing to stop you from overpaying your estimated tax - you will get the excess money back when you file your tax return.
The only reason one might want to pay with a CC at 1.89% is if they had to meet a minimum spend. A $5,000 payment (1 X 3K card and 1 X 2K card) would cost you a total of $111.35 (including full shipping and card fees, which could be offset by a promo code) but, after the $70 rebate from BC, would only leave you OOP $41.35. Not a bad deal

In any other circumstance, I totally agree with you. It is very difficult to make the math work. SunTrust and estimated taxes have been good to me.

Mike
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