Paying my taxes with a credit card | TigerDroppings.com

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rintintin
New Orleans Saints Fan
Life is Life
Member since Nov 2008
7036 posts

Paying my taxes with a credit card


Finishing up my taxes and I owe quite a bit being that I'm self employed. (Quite a bit in my eyes at least) I have the money in savings and could pay it in cash, but I hate seeing my savings go "poof" with one click.

I'm thinking about applying for a 12 month interest free credit card, paying it with that, and paying the credit card off throughout the year. I figure it won't hurt as bad paying it off in increments, and might as well get some rewards while I'm at it.

Any negative consequences I'm missing with this strategy?







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I Love Bama
Alabama Fan
Alabama
Member since Nov 2007
31327 posts

re: Paying my taxes with a credit card


I had no idea paying taxes with cc was an option





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yellowfin
Illinois Fan
Coastal Bar
Member since May 2006
64288 posts

re: Paying my taxes with a credit card


Is IRS going to charge you a fee to pay with cc?





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rintintin
New Orleans Saints Fan
Life is Life
Member since Nov 2008
7036 posts

re: Paying my taxes with a credit card


Yeah they charge a fee, quite a hefty one actually, like 2.29%. But the credit card I applied for I'll get a good bit in rewards towards airfare or hotels with the amount I'm spending, so it will cancel it out and then some. Basically I'll get a free plane ticket out of the deal.





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I Love Bama
Alabama Fan
Alabama
Member since Nov 2007
31327 posts

re: Paying my taxes with a credit card


Good yo know. I'll do the same I think





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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
28659 posts

re: Paying my taxes with a credit card


The IRS will take your card but will charge a hefty fee. You might be better off paying from savings, then charge daily expenses on the credit card until you hit the limit. Just save up for the big payoff after 12 months.

Of course, you could do that whether you are paying the IRS or not.






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CajunRevolution
Columbia Fan
Member since Apr 2009
37920 posts

re: Paying my taxes with a credit card


I got the Chase Sapphire Preferred for this purpose. I owe $3000 to the IRS. I want a free plane ticket. I'll spend it and then pay it back the next day. Works for me.





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BACONisMEATcandy
LSU Fan
My opinions are my own
Member since Dec 2007
40239 posts

re: Paying my taxes with a credit card


I would only do it if you get a sign up bonus for the new card.... Or if I have a card where I need to hit a spending threshold for a bonus or waived fee





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jso0003
Auburn Fan
Birmingham/Atlanta
Member since Jun 2009
4690 posts

re: Paying my taxes with a credit card


quote:

The IRS will take your card but will charge a hefty fee. You might be better off paying from savings, then charge daily expenses on the credit card until you hit the limit.


This, might as well avoid that 2+%






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rintintin
New Orleans Saints Fan
Life is Life
Member since Nov 2008
7036 posts

re: Paying my taxes with a credit card


quote:

The IRS will take your card but will charge a hefty fee. You might be better off paying from savings


Like I said, I did the math and even with the 2.4 % fee I'll come out on top considering the promotion I get from the credit.card spending x amount of dollars in the first few moths. I'll basically get a free plane ticket despite the fee I will pay.






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11thACR
Appalachian St. Fan
Georgia
Member since Mar 2012
445 posts

re: Paying my taxes with a credit card


So this amounts to an after the fact plan for 2012 ? You could have accomplished the same think without the fee or the miles, if you would have made the correct deposits.
What your plan for 2013 ?

Bet you have a balance from 2012 when you file for 2013.






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rintintin
New Orleans Saints Fan
Life is Life
Member since Nov 2008
7036 posts

re: Paying my taxes with a credit card


quote:

You could have accomplished the same think without the fee or the miles, if you would have made the correct deposits.


Well I did make the correct deposits, I said I could pay it off in full with my savings. Now I could've avoided it all if I made quarterly payments, but I didn't so here I am.

quote:

Bet you have a balance from 2012 when you file for 2013.


thanks dad







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MadDoggyStyle
Mississippi St. Fan
Member since Feb 2012
1088 posts

re: Paying my taxes with a credit card


If you are self employed then you must have a business of some sort right? Plumber, accountant, etc? Why aren't you writing yourself a check from your business to pay your taxes? I have to pay quarterly and write myself a check and call it a distribution since I have an S corp. If your business has no cash, then you may have bigger problems. Paying taxes on a cc seems very desperate to me. What am I missing here?


This post was edited on 3/24 at 8:48 pm


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rintintin
New Orleans Saints Fan
Life is Life
Member since Nov 2008
7036 posts

re: Paying my taxes with a credit card


Personal trainer actually. What do you mean writing myself a check? I'm contracted through a gym and receive a bi-weekly check for my services, then a 1099 at the end of the year.

As I've said, I've saved for taxes and have enough to pay it in full with cash, but I'd rather have that cash on hand and pay off the cc throughout the year, while also getting rewards for it.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
28659 posts

re: Paying my taxes with a credit card


quote:

Like I said, I did the math and even with the 2.4 % fee I'll come out on top considering the promotion I get from the credit.card spending x amount of dollars in the first few moths. I'll basically get a free plane ticket despite the fee I will pay.


You realize you can do this anytime of the year? This maneuver has nothing to do with taxes, it's just charging today's expenses and making sure you can pay back after 12 months.

There's no real reason to pay the extra fee.






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rintintin
New Orleans Saints Fan
Life is Life
Member since Nov 2008
7036 posts

re: Paying my taxes with a credit card


Yes, but again I'd rather have the cash on hand and spread out the payment over the year. The rewards are just an extra perk in this situation.





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BACONisMEATcandy
LSU Fan
My opinions are my own
Member since Dec 2007
40239 posts

re: Paying my taxes with a credit card


You can put a month or two worth of expenses on your credit card and not pay the fee though





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rintintin
New Orleans Saints Fan
Life is Life
Member since Nov 2008
7036 posts

re: Paying my taxes with a credit card


I don't care about the fee, or the rewards for that matter, this is simply a strategy to not have to dissolve most of my savings with one payment.





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Teton Tiger
LSU Fan
Somewhere between here and there.
Member since Mar 2005
1515 posts

re: Paying my taxes with a credit card


You might want to try this. Pay with credit card and when the statement comes in pay 1/2 out of savings and pay the balance as soon as you can. You should pay estimates. Estimates should cover the tax due this year. However not to kill your cash flow pay 1/2 of the required amount. This will leave you a smaller balance due next filing season. Then in 2014 increase to 3/4 of the required amount and the full amount in 2015. It will take several years to get into a position of taking care of your financial oblation with less sting on your cash flow. Because cash flow is king in a self-employed business. The penalty for underestimating is not that high. Good Luck.





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rintintin
New Orleans Saints Fan
Life is Life
Member since Nov 2008
7036 posts

re: Paying my taxes with a credit card


Great advice, thank you. I told myself I was going to pay quarterly estimates this year (this was my 2nd year self employed so it was my first year eligible to do so), but waiting till the last minute to pay last years taxes meant that I already missed the first quarterly payment for this year, and now the same has happened again this year. My fault for procrastinating. I like your strategy though.





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