That is correct. It's been that way since they switched to SkyMiles in 1995. Prior to that they counted all miles from all sources, as AA still does. They grandfathered all the "all miles" totals into the new program but counted only flown miles, including minimum flown miles credit for short flights, from then on.

So, putting the tax bill for your Powerball grand prize on a credit card won't get you a bit closer to lifetime Delta status. Of course, if you win the Powerball grand prize, you can buy your own 767 so it wouldn't matter.

(Confirming just to remove any doubt left by the "I think" in the quoted post.)

Too bad too because 2x MR + 20% bonus on transfer to Delta would have been sweet! hehehe. So, guess you need to find a program like AA that allows all miles, not just flown.

Why is there a 'fee' to pay taxes using cc's? Who charges it? The IRS or the CC's? Is there a way to get around paying this fee?

Exactly my point. It might make sense up to a cetain level but does not justify extra K's for points/miles unless you have a super-specific reason/plan and now how to get to it quick. I am going with Pinniped's idea... load on 5k via SPG amex and cut a check for the rest... truely awesome how fast the Department of Treasury cashes checks...has anyone ever noticed?

This is the approach I took last year. Remember you can do 5K on your and 5K on your wife's card if she has a separate SPG Amex account.

There is a "'fee' to pay taxes using cc's" because if there were not a fee, you would have the FFP equivalent of a perpetual motion machine, and there are no perpetual motion machines.

Credit card companies do not fulfill their simple existential purpose, that being to make gobs of money for themselves, by advancing you money and also giving you valuable consideration (airline miles) for the privilege of doing so in return for nothing other than your possible gratitude. While a great many merchants will subsidize that extension of credit and grant of other benies to you by paying the credit card company in the range of 2% to 4% of each card transaction, the IRS sees no reason to accept less than 100% of what they think you owe them. So when the IRS is on the other side of the deal, you must be the one to pay the credit card issuer their "vigorish." Some of us think, though, that this may be one instance in which the "vigorish" makes sense.

So, if you could buy say 100K miles on your favorite carrier right now for $1,250 (1.25 cpm), you wouldn't do it? For $1,000? For $750? They just couldn't be cheap enough to whet your appetite?

Your personal "rule to pay nothing extra to get miles" may mean that you are missing out on some very good deals.

Hmmm. If we got down to under $1,000 for 100k miles on one of the legacy carriers, I'm listening. For AA, I'd do it in a heartbeat. For UA, I'd hesitate for a minute, and then do it. For US, I'd closely examine whether I'd really use 'em in 2006 or 2007 and what my ROI would be.

For the other three, you gotta get down to about $500 before I'm even going to nibble.

Actually, neither of the above. When you pay your taxes with a credit card, you're actually paying a third party such as Official Payments Corporation. The third party then pays the IRS. The third party also adds a "convenience fee" for its services, which is OK with the credit card folks because they don't offer the same service for less if you pay a different way.

Say your tax bill is $100. You pay the third party $102.49. It pays the IRS $100. It then submits a charge of $102.49 to the credit card company and gets (since its volume entitles it to a darn good rate) about $101. Its profit margin is the difference between $100 and what it gets. The card issuer is out $101 it gives OPC, $1-something to the airline for your 102 FF miles, plus their cost of capital until you pay up, or pretty close to the $102.49 you eventually pay. (Of course they hope you won't pay on time, which is where they really make their money, but we're smart enough to know that.) Everyone's working on thin margins, but with high volumes it all adds up.

If there's no fee the business model falls apart. That's why we couldn't pay taxes with credit cards until someone came up with this third-party gimmick to get around rules about merchants not being allowed to add a fee for taking plastic. The underlying problem is that the IRS, unlike many merchants, won't absorb CC fees: if you owe it $100, it doesn't want to end up with $98. Local tax authorities can if they want to, which is why I think you can pay some local taxes by credit card. (Don't ask me which, I can't pay mine that way, but I recall reading posts to that effect here on FT.)

In a way, I'm kind of surprised that the IRS doesn't encourage credit card use. It seems like they would save on both labor and the risks inherent with paper checks, collections, etc. if they just accepted plastic directly.

I mean, in the absence of a 2x SPG deal, I put a paper check in the mail on the night of April 15th. Somebody at a big processing center has to open my mail, manually process the paperwork, get the paper check passed along to get cashed, and it finally comes out of my account sometime in late April.

If I sent 'em $100, I'd be willing to bet it costs them more than $2 to process it.

Obviously if I owe $100,000, it's a different story. The labor costs are fixed, the risk of a bad check is maybe a little higher, but the juice is now a lot higher. Still...maybe if they capped it or said only individual 1040's were eligible. I guess they just have a good thing going as is: a lot of us are, for the most part, willing to pay a third party, making things easy for The Man.

Well, at 2 1/2%, with double miles, you aren't far off. UA has no cap right now.

As an aside, when CCs were first going to be considered for tax payments, the bankruptcy code was amended a few years back to make debts incurred to pay taxes (including CCs) follow the same dischargeability rules as unpaid taxes (a complicated analysis), as opposed to regular credit card dischargeability rules. [See 11 U.S.C §§523(a)(14), (a)(14A)]

You make a good point, but I just have so much energy and time for this game and I found that chasing the bonuses was starting to distort my (usually) rational purchasing behavior. Its kind of like double coupons at the grocery which we have in my area. Its nice to get two bucks off, but how many poptarts do I really need?

And, at least with poptarts, I can always eat 'em. With miles, who knows when a vast devaluation might come along. Or the miles might just disappear (unlike my uneaten cherry poptarts) So far, miles have come through the bankruptcy courts okay, but it doesn't have to always be that way.

not talking poptarts
 

This conversation is taking place on the MilesBuzz forum, where "information related to the latest frequent flyer program buzz" gets posted and discussed by those interested in "a miles or points offer." Someone may participate in FT because they are after low fares or other travel-related information that can be gained through FT, but if they are little interested in miles or points, then on this particular forum they will be like a vegan listening to non-vegans sharing recipes for meat, poutry, or fish. (I have never eaten a poptart or looked at the package labeling, so I don't know whether they are made with dairy products that a strict vegan would abjure.)

FTers differ as to the value of miles/points. I myself would not rush to buy airline miles at 2 cents per mile, because that is too expensive a plug-in when all is taken into account for me. (The Citibank Aadvantage MasterCard reduced "convenience" fee of 1.99% on federal tax payments appears to yield AA miles at approximately 2 cpm, which is 60% more expensive than what one can get UA miles for with the UA VISA card offer, and perhaps still more unfavorable in comparison to the SPG AmEx deal, since SPG points transfer more favorably than 1:1 into airline miles other than UA ones.) But when UA miles are there for purchase at 1.25 cpm, or maybe less on other carriers through SPG, and there are additional benefits to use of the charge card, then I am interested, notwithstanding threats of airline bankruptcies, limits on award seat availability, etc. And a deal like this one can yield me a great deal more than can double coupon savings on poptarts, even if I did eat them.

I have a balance transfer out with Discover now for a couple of years. The interest rate is 0 and I don't use the card to charge anything. It was up to $13,000 now just under $10,000 since I must pay the minimum balance each month. I had little or no balance transfer fee. Also did this with a couple of other offers a couple of years ago. I figure I have made $1000 just borrowing their money. The banks don't like people like me!

Lots. Those S'mores ones are mighty tasty. ;)

That's a great point, and it's why your earn-burn pattern is extremely important when deciding to voluntarily buy more miles than necessary. (We are all somewhat forced to buy miles and points because, Priceline aside, they come involuntarily bundled with our airline tickets and hotel rooms, but we certainly don't need to "buy" them each and every time we use a credit card.)

With each of my major FF/hotel accounts, I know roughly what the flow is. My Starpoints live & die quickly - maybe a year, tops, on a FIFO basis. I burn 'em on 2-night Cat 2's as much as I do on 5-night Cat 4's. I'm always using them. My Marriott points live longer - 24 to 36 months - because I hoard for the bigger Travel Packages.

I have my arbitrary redemption values for both currencies, but I require a much bigger "discount" against my personal value before I'll buy a Marriott point vs. a Starpoint. I pretty sure I'm going to monetize my existing Starpoints before the program changes (and leave little on the table if a major change is announced); I don't really know that for the Marriott points, simply because of the longer lifespan.