If you're able to use these miles for long-haul flights in F and C, you'll be quite happy to pay the $12k.

The key word is able.

Absolutely. I've done it five times, though. It usually requires advance planning, some flexibility and frequent checks on availability.

Agree. If one is able to redeem miles for expensive international tickets, then can get more than a 2.5 cpm value from them. (It's still bettter, though, to start with miles purchased at .995 cpm or 1.245 cpm, as one could do in April with the cards offering double miles then, and one can still do through the end of the year with UA Visa.) (wink emoticon)

My math is about that. Three times I've gotten Virgin Upper Class awards using 100k miles on Delta (actually, the first was at 80k). I'd probably be willing to pay $2.5k for those tickets. 140k for RT F on Singapore. I'd spend 50k miles just to spend a few hours with those FAs.

If you only value at $2.5K the ticket you pulled down as an award for 100K miles, then you are at best breaking even with the purchase of those miles at 2.5 cpm. (Buy them now at 2.5 cpm; hold them while subject to risk of devaluation through changes to FFP or airline problems; and at some time in the future redeem them, not necessarily when you want to?) When I "buy" miles by using my credit card to pay taxes, I am not looking to break even or just come out marginally ahead later when I "sell" them back, I am looking to get a doubling or more of my upfront cash "investment" in those miles.

Didn't mean to suggest I'd pay 2.5 cpm. I think I did something like that once to top off my daughter's balance with the purchase of one or two thousand miles, but that's the only circumstance in which I'd pay retail.

The bulk of my miles comes from tax payments (self-employed, so it's all estimated payments and balance due) at a cost of about 1.26 cpm, after you account for the double miles.

If you are a long way from AA Gold/Platinum, and don't usually charge much on an AA-earning CC, you might want to think about how much it would be worth to you getting to Gold/Platinum.

Platinum status has got to be worth a few hundred bucks a year at last.

And your $12,000 fee should be tax-deductible as a business expense, some way or other, right?

I found the answer!

Q. Are convenience fees an allowable deduction on my tax return?
A. The convenience fee is considered an allowed business expense deduction.

http://www.irs.gov/businesses/small/...155062,00.html

This FAQ was taken partially out of context. The above FAQ was an answer in response to the convenience fee for paying Forms 940 and 941 EMPLOYMENT TAXES, NOT Form 1040 personal income taxes. Here is the heading on that page:

The Internal Revenue Service has expanded the credit card tax payment option for taxpayers. Beginning January 2006 taxpayers may use a credit card to make business tax payments towards the balances due on their current quarter Form 941, Employer’s Quarterly Federal Tax Return, and current year Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. They will also be able to make credit card payments for balances due on the prior three quarters Form 941.

The answer to whether the convenience fee paid on personal income taxes (Form 1040) is deductible as follows:

The fee is a non-deductible personal expense; however, it is a deductible business expense.

Source: http://www.irs.gov/efile/article/0,,id=101316,00.html

To clarify this answer: The portion of the fee allocable to taxes on business income is deductible as a business expense (e.g., on Schedule C or C-EZ); the portion of the fee allocable to taxes on nonbusiness income is not deductible as a business expense.

Thanks, DCBob, for that very important clarification.

So does the above mean that though the FF miles may go to the employer's own account, and he/she can then use those miles for any purpose, including entirely personal ones, the convenience fee for business tax payments will be fully deductible? I considered it a good deal to buy UA miles at 1.245 cpm (actually a tad less, since the convenience fee earns miles too), but if the government will subsidize it so as to bring it down to less than .85 cpm, so much the better. (Is this really kosher, though?)

Fair enough -- I guess I thought it was obvious that only taxes stemming from the business income would be a deductible business expense.

when will "bonus" miles show up?
 

I don't suppose anyone has seen their "bonus" miles show up yet, have they? I have seen 1 mile/point for each $1 of taxes paid with my UA Platinum Visa and SPG AmEx, along with 5K of EQM for total spend of >$35K with the former, but no "bonus" miles yet. I gather that may take a couple of cycles, so I won't start fretting about it for awhile, though would be nice to have the benefit of our bargain sooner rather than later.

A different question in anticipation of paying 6/15 taxes with UA Visa for more of this double mile stuff - how quickly under normal circumstances can one pay their card balance and see their credit limit back up again? I have a substantial limit on my card, but I want to exceed it for this tax payment deal. If I pay online, drawing the money from my bank account, should I expect to see the credit line fully "restored" after a couple of days, or might I have to wait longer than that before I can pay additional taxes with the card?

I charged to my UA Visa back on 4/17, but am still waiting for the cycle to come around and see the money sucked out of my account. No bad to get a month of float on a substantial sum as part of the bargain. Will be sorry to give that added benie of the float up if I accelerate payment of the account balance in order to restore the credit limit and go at it again, but expect I must accept this for now, and maybe seek a higher credit limit in the future.

Any suggestions on how to further tweak this, if it can be further tweaked?
(And please reassure me that I will see all the miles I am expecting before too long, because 1.245 cpm works for me, but 2.49 cpm would not.)

Disregarding the miles, a business could certainly argue that the fee paid was well worth it for the float and the convenience, and thus the fee would be fully deductible on its own. Businesses pay for and buy all kinds of stuff that many of us would consider extravagant and pointless and the IRS lets it through as deductible.

Technically, it seems logical that if you or your comapny are getting a business deduction for the generation of the miles, personal use of those miles ought to be taxable some way or another.

I am not an accountant, but I've followed this topic over the years, and I have never heard of anybody getting fined over this "avoidance."

It probably also comes down to the quantity of the miles involved as to whether the IRS would care much. IIRC, they have issued statements about FF miles not ordinarily being taxed.

I'm not an accountant either, so my thinking amounts to little more than speculation here, a potentially hazardous thing. I believe that the IRS did entertain the idea of taxing miles earned through business travel and kept for personal use, but backed off in the face of loud protests. Miles by paying a business' taxes or other expenses with a credit card is somewhat different from miles gained through business flying, but I don't see why the disposition of the miles earned with the credit card through spending should make a difference from the IRS's perspective if it doesn't when the miles come from flying. (Yes, I can talk myself into this! Now, can I convince my accountant?)