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I have an evergreen “how to pay your taxes with a credit card” article which you can find here, but I wanted to share my own personal experience. I’ve always paid my estimated business taxes with a credit card, and I have family members who pay their estimated taxes with a credit card, but this was the first year I paid my federal taxes via credit card. So…how did it go and what was it like?
Why did I do it?
Primarily because I can arbitrage the processing fee and earn more value in points than I’m paying in fees.
Which card did I use?
I paid our personal federal and my business taxes with my Bilt Mastercard® and our state taxes with a Capital One Venture X. I should have paid with my Bilt Mastercard on rent day ( 4/1/24 ) to earn double points, but I was in Latvia and totally forgot.
I principally interested in getting my yearly spend above $25k so I’m eligible for 125% bonus transfer when they offer them.
That effectively means I’m earning 2.25 points when I choose to move them ( They’ve offered this bonus on Flying Blue, Emirates, Virgin, IHG, and Aeroplan ). Those 2.25 points are easily worth 4 cents per dollar when redeemed on Flying Blue, Aeroplan, Emirates, or Virgin; however, not when used on IHG ( that’s a bad transfer imo ).
I paid the other with Venture X because every purchase earns a fixed 2x per dollar and those points are easily worth 1.5 cents a piece meaning I’m netting out a minimum of 3 cents on a 1.87c fee.
What’s the cost?
I paid a 1.87% fee to use Pay1040 which is an authorized IRS tax processing agent. I’m not sure why I didn’t choose payUSAtax since it offers a slightly lower fee, but I hastily chose Pay1040.
What information do you need?
As soon as you choose a payment agent, you’ll need:
- Total payment owed
- The type of taxes you’re paying – the form number
- Your Social
- Your Spouses Social should you be filing joint
- OF course your credit card
Documenting your taxes
Another reason this is quite beneficial is having a very straight forward record of payment. Several years ago I was told that I hadn’t paid some estimated taxes for my business in California. I didn’t have to dig through checks, etc to find a record and chase it down, I merely forwarded the payment receipt that had been emailed to me after payment. The one I received on my personal looked like this:
Is it right for everyone?
No… I’d highly suggest reading the full article, but if you can arbitrage the fee it can make a lot of sense. It’s especially valuable if your taxes can help you hit a big minimum spend requirement and unlock a massive bonus. Either way…this is what I did, and happy to have done it!
Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.
Chase Sapphire Preferred® Card
Welcome Offer
60k Points after $4k spend in 3 months
Annual Fee
$95
Points Earned
Transferrable Chase Ultimate Rewards
- 60k points after $4k spend in 3 months
- Worth $750 in Chase Travel℠ and way more if you maximize transfer partners
- 5x on all travel purchased through Chase Travel℠
- 3x on dining, including eligible delivery services for takeout & dining out
- 3x on select streaming services
- 3x on online grocery purchases
- (excluding Target, Walmart and wholesale clubs)
- $50 Annual Chase Travel Hotel Credit via Chase Travel℠
- The begins immediately for new cardmembers and after your account anniversary for existing cardmembers
- 2x on all other travel
- 10% Anniversary Bonus
- Every year you keep the card, your total spend will yield a 10% points bonus. If you spend $10k in a year, you’ll get 1k bonus points
- Chase Sapphire Preferred continues to redeem at 1.25c in the Chase Travel℠ and the slew of other benefits remain in tact including Auto Rental Collision Damage Waiver ( primary ), purchase protections, etc.
- Points are transferrable to 14 Ultimate Rewards partners
- Redeem in Chase Travel℠ for 1.25 cents per point
- No foreign transaction fees
- Suite of Travel and Purchase Coverage
- Auto Rental Collision Damage Waiver is my favorite
- Get complimentary access to DashPass which unlocks $0 delivery fees and lower service fees for a minimum of one year when you activate by December 31, 2024
- $95 Annual Fee
We keep an up to date spreadsheet that lists the best ever offers: You can find that spreadsheet here.
Historically 80k is a very, very good offer and hit in both 2022 and 2023. In 2021, we saw the offer hit an all time high of 100k. Who knows if that will ever come back.
Main Cast:
Cards that earn flexible points and should be used on the bulk of your purchases.
Supporting Cast:
Cards that earn fixed points in the currency of the airline/hotel and can not be transferred at attractive rates. These cards yield benefits that make it worth keeping, but not necessarily worth putting a lot of your everyday spend on.
The Chase Sapphire Preferred® is exceptional starter card and offers transferrable Ultimate Rewards, and pairs well with other Chase cards.
If you carry this card alongside Chase’s cashback cards like the Chase Freedom Flex℠and Chase Freedom Unlimited® or the business versions: Ink Business Cash® , Ink Business Unlimited® you can combine the points into Preferred account and transfer into hotel and airline partners
Annual fee is quite low at $95 a year + you get a 10% anniversary bonus on points + $50 hotel credit in Chase travel.
The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved, or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.