Is This a Smart Way to Pay Your Taxes?
Like many of you, I am self-employed. It’s not that I don’t play well with others. It’s because I like to throw company picnics on my bike. Being self-employed, I pay estimated income tax every quarter.
I had always written a check because paying with a credit card tacks on a fee. Why waste money? For example, the IRS approved website PayUSATax.com charges a 1.89% fee to use your credit card to pay your Federal Income Taxes – including estimated quarterly payments. For every $1,000 paid, an $18.90 ladle of fees gets poured on top of what you pay.
But… using a card can be a GOOD idea! Here’s how:
1. If you have a credit card that pays you 2% in cash back or airline rewards, you’d only profit $1.10 per $1,000 paid. Using a card might be worth it for the convenience and knowing the payment got there. It could also get you more frequent flier miles needed to get to the next level for a free flight or hotel stays.
2. You could use it to meet a spending requirement on a credit card offer –
such as the card with which I have a bromance – Chase Ink Bold Charge card. That card will give 25,000 Ultimate Rewards points worth $250 cash or $312 in travel – for your first purchase. Buy a pack of gum and you’re done. The second bonus isn’t as easy. They’ll give another 25,000 UR points bonus if you spend $10,000 in the first three months the card is open. I talk about ways to achieve this second bonus here and via Bluebird. You could use some of those ideas or just pay your taxes.
If you paid $10,000 in taxes on your credit card, they’d tack on $189 in fees.
That would get you the first and the second bonuses worth a total of $500 cash or $625 in travel. You’d also get 10,000 UR points (1 point per dollar spent) for the charge on the card. That’s another $100 cash or $125 in travel. Grand total: Spend $10K paying taxes on the Chase Ink Bold Charge card, get UR Points worth $600 in cash or $750 in travel for only $189 in PayUSATax.com fees.
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