Earn CC Points By Paying Your Taxes

Here is a great tip to keep in mind when paying your taxes.

I know that many small businesses love to build up credit card points for personal benefit. I know, I certainly enjoy doing that myself.

This is a great Tax Strategy to keep in mind when paying your tax bill.

Why? Because when you redeem those credit card points they are currently tax-free. And it can be an added bonus when it comes time to pay your tax bill.

No matter how you file your taxes, you have the option to pay your tax bill by using a major credit card. In fact, you can make these payments with your credit card anytime.

How This Could Benefit You

Well, with this method of payment you can delay paying the actual cash for your taxes. Also, depending on your credit card it may be a lower interest rate than the IRS would give you if you were on a payment plan.

It could also help you avoid penalties in the event you didn’t have the cash to pay on time. Then of course when you use this method you can gain points towards whatever reward program that you have with your credit card.

The Disadvantages

There are a few disadvantages. You'll want to first weigh your option to decide what works best for you personally. For example, there is a convenience fee charged by service providers whether you pay by debit or credit card. That convenience fee is not deductible. There is also the interest on the credit card and that is not tax deductible as well. But, airline miles for one are not taxable. 

Since the airline miles are not tax deductible not only can you earn points when you take a tax deductible business trip. But then you can turn around and pay your taxes with a credit card and earn more miles or points.

If you decide to go this route, there are two companies officially authorized to take tax credit and debit cards payments for both electronic and paper filers are Link2Gov Corporation and Official Payments.

Things To Keep In Mind

Some states will also accept credit card payments of state taxes, but be aware that the federal and state payments are not combined. And You can use these companies to charge taxes to an American Express, Discover Card, MasterCard, or VISA card or BillMeLater account or even pay using a debit card. 

This method works to pay any tax that is due on your Form 1040, 1040A, or 1040EZ including individual estimated taxes; installment payments; payments with an extension of time to file (Form 4868); trust fund recovery penalty; and Form 5329 (IRA taxes).

Before you use any of these programs, make sure you do your research on the fees, as well as any other potential pros and cons of paying your taxes with this method. 

 And you never know. Paying your taxes could actually help you take a much needed vacation when it’s all over.

Let me know if this Tax Tip was helpful. If you have any questions or comments or would like to know more about how Tax Planning can benefit your Real Estate Business please feel free to reach out to me here on LinkedIn and make sure to check us out at The Tax Planning Pros.