I noticed that it is possible to pay Fed income tax with a credit card. I also know that people can overpay their taxes. Can you overpay your taxes with a credit card? If so, would the government then send you your overpayment as rebate check, saving the miles? Is this possible?
I tried searching the board for similar posts but could not find any. Sorry if this question has been answered in the past.
Thanks

There are many threads here regarding payment of taxes with mileage earning cards. I don't know the answer to your specific question, but do note thaa there is (I believe) a 2.5% service charge on all such payments.

The DL AMEX Card has announced double miles for paying taxes with the card, which makes it an OK deal, moderately outbalancing the service fee.

Last year AMEX had a promotion for an extra 5,000 MR if you paid your taxes with it. Last year I paid close to $0.008 a point, but so far the only thing that I have seen is the Delta double SkyMiles promotion. Last year the 5,000 didn't show up until late March. Maybe the same will happen this year.

http://www.officialpayments.com/

Under Title 15 of the US Code, refunds for purchases made by credit card are supposed to be given back as a credit on your account.

So, the gov't would probably give you a refund in the form of a credit, thus you'd receive no points for the overpaid amount.

d

Well, it doesn't work that way. You should know that gov't rules don't apply to itself! Seriously, I haven't read the actual statutes, but I suppose how this is accomplished is that the authorizing legislation for the credit card payments has an override clause for any conflicting rules.

In any event, the way it works is that the US federal government doesn't directly take credit cards - you have to use an authorized third-party payment company. I know of at least two. The third-party company charges your credit card for the taxes (in two transactions - one for the tax due, and one for the "convenience fee"). Then, they foward the tax payment to the government. So, the government receives a check or similar instrument from the payment company very much like you had sent in a check yourself. Any extra money you pay has to be refunded directly from the government in the normal way.

So, theoretically you could take advantage of this to get extra miles. As cactuspete already pointed out, you have to pay 2.5% of the total payment, including the overpayment, made to the credit card. Plus, you don't get your overpayment back until after you file your tax return.

So, you could make a credit card payment with your Form 4868 filing (automatic extension to file) on April 15, then on April 16 file your actual return electronically, and request that your refund be ACH'd to your checking account. In ordinary situations, you'd have your refund within 14 days of filing. However, it's likely that they won't process your refund until they have all of your payments for the year posted (which would include W-2 withholding, 1040ES payments, and most importantly in this example, the 4868 payment). I doubt that this happens instantly, so you may end up waiting a few more weeks. Interestingly, unlike your tax return itself, even the paper 4868 does not require your signature, nor are you making any declaration that the information is "true, correct, and complete," so it would seem that there is no potential criminal penalty for doing this scheme. (In the case of an underpayment, of course you're still liable for late fees and interest, and potentially criminal penalties, but this is because of the underlying problem of not paying your tax on time, not because of anything done on the 4868).

Please note that I'm not an attorney, and I give no warranty to any of the above.

Woodsmit, you're not the first one to have thought of this!

Boy, someone's desperate for miles.

Please note:

1. You may wish to contact a lawyer before doing this.

2. When you play with the IRS, you generally lose in the end.

Just some food for thought...

Earn DOUBLE MILES when you pay your federal income taxes with the Delta SkyMiles� Credit Card, and enjoy tax time as never before. You can do it via the internet or by calling 1-800-2PAY-TAXSM (1-800-272-9829), and you'll earn two SkyMiles� for every eligible dollar you charge. That could make tax day the most rewarding day of the year! If you would like to make a tax payment that is over your available line of credit, please call 1-800-230-1284 by 04/01/2002. For all other questions, please call the toll free number on the back of your card or click here.

http://www10.americanexpress.com/sif...,00.asp#taxday

Here is a link to last year's discussion of this offer:

http://www.flyertalk.com/pasttalk/ft...ML/003968.html

Once the convenience fee (2.5%) is paid, is the tax amount treated as a purchase -- i.e., no interest accruing until payment due? If so, you're also getting up to 90 days free float with Amex, depending on the timing. If you're dealing with a large amount, it is even possible to request a change in your CC's due date to maximize the float period. Most CC's will let you do this one time.

First, let me mention that I didn't actually do the set of transactions I outlined above. I was just pointing out what is possible.

As to "playing with the IRS" and the possible consequences, my observation is that the only thing such a scheme involves is making an interest-free loan to the government. From the government's point of view, "if only all taxpayers were so generous!" The entire cost of the pay-taxes-by-credit-card scheme is borne by the third-party payment companies, who fully recoup these costs (plus their profits) from the taxpayer through the convenience fees.

In fact, this is exactly the situation in my experience. I've paid taxes using a MasterCard and American Express card, and in all cases, the transaction is treated as a purchase. In fact, this is why you're paying the convenience fee to the third-party processor: they must somehow recoup the discount rate they pay the card issuer. These plans would make little sense if they were treated as cash advances, as the two major benefits of them are a) interest-free grace period, and b) mileage accrual, neither of which would be benefits if the transactions were treated as cash advances.

I wrote this payment service company early Jan and proposed to charge a large quarterly payment if they would reduce to sub-2% range...they declined outright.

At 2%, this is break-even in the sense that a charger should never be willing to pay over 2% surcharge to get miles that are valued only a 2% (2c/dollar).

They didn't disagree, but mentioned issues of fixed costs, etc.


FWIW.