No one likes to pay taxes, but the IRS makes it easy to do so by the permit companies opted for processing credit and debit cards on its behalf.
The downside is that these companies charge a fee for processing taxpayer payments. These fees, which range from 1.87 percent – 2.35 percent of the taxes paid, and make it wise to pay your taxes with most credit cards. IRS list of functions authorized companies to accept payments on behalf of federal taxes, along with fees.
But what if there was a way to charge your tax payments to the credit card that got bonuses worth more than the fees paid? This is what it can do for cardholders savvy when choosing the right credit card to pay the tax bills. Moreover, there is an ingenious loophole that could allow taxpayers to pay a fee smaller than 1.87 percent.
When Bonuses Worth more than Fees
Less fees charged by a website authorized by the IRS to accept tax payments is 1.87 percent. These sites are VAT payment and pay USA tax, which is almost identical web pages that are run both by a company called value payment systems. At this rate, any card that offers rewards worth more than 1.87 percent would be useful to use to pay the tax bill.
For example, Venture rewards card from Capital One offers double miles on all purchases, and each mile is worth one cent toward gift cards or statement credit toward any travel purchase. This means that all the process of buying back bonuses worth 2 percent of spending. Even if the cardholder tax bill $ 5,000 at this site, he or she will carry the $ 93.50 fee, but earn bonuses of $100 for a net benefit of $ 7.50. While this may not be a large amount, it does not mean that the taxpayers and which are more of a difference to get a credit card transaction fees.
And Fidelity Investments Rewards American Express offers 2 percent cash back rewards that are deposited in the calculation of the playoffs with Fidelity Investments, will apply the same taxpayers’ expense if it uses one of these cards to make a payment taxes.
With Starwood Preferred Guest Card from American Express, cardholders earn one point for every dollar spent on all purchases and these points can then be converted into frequent flier miles with more than 30 different companies. In addition, cardholders receive 5,000 bonus points when transferring 20,000 points to miles at once, so every dollar spent on this card translates to 1.25 kilometers aviation.
If cardholders are able to redeem those miles for tickets worth 1.5 cents a mile or more, which could be meaningless to pay their taxes with this card. For example, the cardholder, which carries 20,000 Starpoints for American Airlines receive 25,000 AAdvantage miles. If you use those miles for domestic round-trip ticket prize valued at $ 375 or more, of the cardholder come out ahead when they pay taxes with Starwood card.
When the Rewards are Worth less than the Fee
In other cases, it still makes sense to pay the tax bill even if the rewards are worth spending less than the processing fee. This is the case when cardholders are close to reach the spending threshold to earn a big bonus. For example, Starwood card offers 15,000 bonus points for new applicants who spend $5,000 within the first six months of opening the account. If you pay taxes with this card will enable cardholders to reach this threshold spending in a timely manner, the value of points earned can be well worth the processing fees to pay taxes.
Maximizing Rewards and Reduce Fees
Payment methods to accept tax payments from debit cards with a flat fee starting at $2.49 in payment. Although there is almost no leaving the debit cards that offer rewards, taxpayers and savvy will still be able to use their credit cards to buy prepaid cards and debit cards sold gifts in grocery stores and drug stores, gas stations, and even some stores. In this case, taxpayers will pay $4.95 when you buy a $500 gift card, in addition to the flat fee for each debit card card pay $2.49 or more. Thus, the total fee for a gift card and a debit card fee will be equal to about 1.5 percent of the taxes paid ( $500 per payment ), a small savings to get out of credit card charges 1.87 percent.
The real advantage to buy debit cards prepaid with your credit card is that you can do it, where rewards are offered a bonus. For example, Wells Fargo currently offers many cards that contain cash back 5 percent at gas stations, grocery and drug store purchases during the first six months of the card holders ‘, which means that the holders of their own cards can earn bonuses worth 3.5 per cent of taxes paid.
In addition, the American Express Blue Cash Preferred offers 6 percent cash back from spending in grocery stores on the cardholders ‘ first $6,000 of spending qualifying every year, so taxpayers can earn visualize rewards Tune to 4.5 percent of tax payments. This works out to $ 225 savings on the tax bill $5,000.