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Should I pay my 2020 taxes with the credit cards ?

Stewiegriffin
Member

Should I pay my 2020 taxes with the credit cards ?

Hello Community!

 

I have to pay 8 k in Federal taxes and $200 in State Taxes. My CPA suggested to pay the amounts with credit cards and earn points or rewards.

 

I do have cash to pay them but I am thinking about the pros and cons of paying with the credit cards.

 

I do have 4 credit cards (2 BOA rewards cards ,1 American Express Blue,1 Wells fargo) and my utilization is 6 %  and credit score is 780 from Equifax(checked today) and it has been almost 4 years since I opened any new accounts and I am thinking of opening 2 new credit cards to pay the 8k. 4 k on each card to maximize the rewards or points. 

 

Could you guys, let me know if this is a good idea or not ? if it is then what cards should I open to maximize the points. I am leaning more towards bonous points or cash to spend it on Air Travel.

 

Thanks much!

Stewie

26 REPLIES 26
wasCB14
Super Contributor

Re: Should I pay my 2020 taxes with the credit cards ?

I pay my taxes by CC.

 

Popular options:

Anything with a big bonus and/or a long 0% period

Amex Blue Business Plus (up to $50k spend per calendar year, my favorite)

BofA Premium Rewards or Travel Rewards if you have significant assets there (Platinum or Platinum Honors)

Anything that gives 2% cash or more works Federally. State fees vary and can exceed 2%.

Chase Freedom Unlimited for people who use URs for travel

Citi Double cash (as 2% cash or 2x TY points)

BofA Virgin Atlantic

Anything that helps get you a meaningful elite hotel/airline status

 

*3% cards are popular but I'm not aware of one with a big SUB. It can take a lot of spend to make up for that, and there's no way to convert the cash to miles (short of buying miles with cash).

Spend: BofA PR + WWFCR, BBP, Schwab Platinum, CFF+CF, Costco, Discover
Perks: IHG49, Hyatt75, Delta Platinum, "Old" SPG95
SD/AAoA Ballast: Arrival, CFU, DC
Upgrade/downgrade games: BCE, EDP
SUB: JetBlue, Amex Platinum
Mostly earning MRs and cash back as I use up hotel and airline points spread across several programs.
Message 2 of 27
TheBoondocks
Established Contributor

Re: Should I pay my 2020 taxes with the credit cards ?

@Stewiegriffin Mr Family Guy, Stewie the baby freaking Griffin lol bro, if paying taxes of course it has a 3% or so fee, I don't think I would do it. Like I remember I had to pay a ticket off for something with my car and on the ticket it says if I paid thru by phone or credit card, they would charge a $6 fee. But if I mail them a check, no fee added. 

 

Man, that's a huge tax... What you been doing, going tax exempt lol? 😂😭 That's crazy bro. Yeah, I wouldn't even do a credit card with that, the fees add up eventually. 

Message 3 of 27
wasCB14
Super Contributor

Re: Should I pay my 2020 taxes with the credit cards ?


@TheBoondocks wrote:

@Stewiegriffin Mr Family Guy, Stewie the baby freaking Griffin lol bro, if paying taxes of course it has a 3% or so fee, I don't think I would do it. Like I remember I had to pay a ticket off for something with my car and on the ticket it says if I paid thru by phone or credit card, they would charge a $6 fee. But if I mail them a check, no fee added. 

 

Man, that's a huge tax... What you been doing, going tax exempt lol? 😂😭 That's crazy bro. Yeah, I wouldn't even do a credit card with that, the fees add up eventually. 


Maybe some states and local governments charge 3%, but most of the tax due is Federal ($8000). State is only $200.

 

Pay1040 charges 1.87% for Federal

PayUSAtax charges 1.96% for Federal

Official Payments charges 1.99% for Federal

When I lived in NY I paid 2.25% for state

In CA I pay 2.3% for state

 

My BBP gives me 2x MRs. With Schwab Platinum, that's a 2.5% cash floor with the option for much more with miles.

My BofA Premium rewards gives 2.625%. Not 3%, but it came with a $500 SUB.

 

And CC users earn rewards on the fee, too. So a 2.25% earn rate even slightly exceeds a 2.3% fee (2.25%*1.023=2.30175%).

 

Even without a great long-term earn rate, a SUB of a few hundred dollars is worth far more than the fee.

Spend: BofA PR + WWFCR, BBP, Schwab Platinum, CFF+CF, Costco, Discover
Perks: IHG49, Hyatt75, Delta Platinum, "Old" SPG95
SD/AAoA Ballast: Arrival, CFU, DC
Upgrade/downgrade games: BCE, EDP
SUB: JetBlue, Amex Platinum
Mostly earning MRs and cash back as I use up hotel and airline points spread across several programs.
Message 4 of 27
FieryDance
Frequent Contributor

Re: Should I pay my 2020 taxes with the credit cards ?

Absolutely!  With a little extra attention and planning there is literally no downside that cannot be easily mitigated.  

As @wasCB14 explained there are many approaches. 

 

You can pick a 0% APR card that allows you months of float.  

 

Your favorite everyday 2% card can make you a small profit, especially on Federal taxes where convenience fees are all lower than 2%.  If utilization is a concern just pay it off before statement date.


And, you can go beyond on-going rewards because paying taxes is also one of the easiest and safest ways to meet large minimal spend requirements with very lucrative SUBs.  

 

I started late last year and within months knocked out over 10 MSRs, effortlessly.  No need to go down the rabbit hole of MSing and no questionable issues whatsoever.  😇

 

 

 

Message 5 of 27
Stralem
Established Contributor

Re: Should I pay my 2020 taxes with the credit cards ?

I won't regurgitate what has already been said, but absolutely do this. I have a $10k federal tax bill I'm about to pay using my Platinum card (I'm fully on the MR wagon right now), but I'm contemplating opening up a new card with a juicy sign-up bonus just to take advantage of the opportunity. You know, making lemons into lemonade and all that. There are no real downsides. 

I Have Way Too Many of These.

American Express - 7 Years & Counting Without a CLI

Citibank - Handing out CLIs Like Candy

Chase - Surprisingly, Still Tolerating My Credit-Chasing Ways

Bank of America - They REALLY Like Me For Some Reason...

Errrrr'one Else - Because I'm Lazy
Message 6 of 27
wasCB14
Super Contributor

Re: Should I pay my 2020 taxes with the credit cards ?


@Stralem wrote:

I won't regurgitate what has already been said, but absolutely do this. I have a $10k federal tax bill I'm about to pay using my Platinum card (I'm fully on the MR wagon right now), but I'm contemplating opening up a new card with a juicy sign-up bonus just to take advantage of the opportunity. You know, making lemons into lemonade and all that. There are no real downsides. 


If 1x MR beats CFU's 1.5x UR, perhaps a BBP, EDP, or Business Platinum? Not sure what the best public or referral offers on those are. I just got 25k for upgrading ED to EDP. I might put a tax payment on that as my grocery spend alone might fall a little short of the required $2k in 3 months.

Spend: BofA PR + WWFCR, BBP, Schwab Platinum, CFF+CF, Costco, Discover
Perks: IHG49, Hyatt75, Delta Platinum, "Old" SPG95
SD/AAoA Ballast: Arrival, CFU, DC
Upgrade/downgrade games: BCE, EDP
SUB: JetBlue, Amex Platinum
Mostly earning MRs and cash back as I use up hotel and airline points spread across several programs.
Message 7 of 27
RickNATL
Established Contributor

Re: Should I pay my 2020 taxes with the credit cards ?

Your idea is good. Hopefully, you can optimize the opportunity as paying taxes with card has fees...weight them both.

 

I opened a new card with 100K SUB after a certain spend. Paid my taxes with the new card and met the.minimum spend, and got.my 100K SUB. 

 

Like.you, I had the cash, so paid the bill the next month. 

Message 8 of 27
Stewiegriffin
Member

Re: Should I pay my 2020 taxes with the credit cards ?

@TheBoondocks  Thanks for the advice and making me laugh! I paid it off with a Check.  I wish I was going tax exempt lol? 😂 , I have a staffing firm and ended up paying this amount to the IRS.

Message 9 of 27
wasCB14
Super Contributor

Re: Should I pay my 2020 taxes with the credit cards ?

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Spend: BofA PR + WWFCR, BBP, Schwab Platinum, CFF+CF, Costco, Discover
Perks: IHG49, Hyatt75, Delta Platinum, "Old" SPG95
SD/AAoA Ballast: Arrival, CFU, DC
Upgrade/downgrade games: BCE, EDP
SUB: JetBlue, Amex Platinum
Mostly earning MRs and cash back as I use up hotel and airline points spread across several programs.
Message 10 of 27
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