Should you pay your taxes with your Credit? | Wholesale Restaurant Supplies NYC

Should you pay your taxes with your Credit? | Wholesale Restaurant Supplies NYC

For those of you who love racking up airline miles or earning cash back, paying your taxes on a credit card might be too appealing to pass up. For others, this may be a great way to stealthily increase your cost of taxation, or worse, letting taxes spiral your debt out of control.
This may be a case of do as I say, not as I do. I pay my taxes with a credit card. GASP. I do it for convenience, and more importantly, to rack up airline miles. But this convenience and miles does come at a cost in processing fees. Because I always pay the total statement balance on my credit card each month the cost stops there. This strategy will NEVER work if you are going to end up carrying a credit card balance.

For me it comes down to aircraft regular customer status. I fly a bit, yet insufficient to have top level status. Hitting spend edges on my Visas gives me an additional 30,000 emblem qualifying miles which helps knock me up a status level. I need to pay a 1.87% Visa handling expense to have the capacity to pay my assessments with a Visa. This expense will generally mean any esteem I collect from miles will be a wash. It is the limit rewards that puts me ahead. My charge card gives me extra BONUS miles on the off chance that I spend over specific levels consistently. This skews the math for utilizing a Visa in any event for my situation.(wholesale restaurant supplies nyc)

We utilized miles and wound up getting great over 1.87 pennies for every mile of significant worth. The accommodation of paying with a Visa is decent however sending a check each quarter isn’t that huge of an arrangement or inconvenience.  Lie level seats are luring, yet this decision won’t function admirably for everybody.

Here are a few things to consider before putting your tax bill on a credit card.

What fees will you pay?

The IRS is barred from paying credit card processing fees. So, to pay your taxes with a credit card you will end up having to pay these fees. A quick check on the IRS payment site shows the fees currently range from 1.87 to 1.99%. If you are getting 2% cash back that’s hardly worth the effort to try and arbitrage a 0.001% additional cash back. That means that if you had a $10,000 tax bill, you would only net $10 of extra value. On the other hand, for mileage maximizers these extra miles will put you closer to your next free flight. You may be able to get an extra 1-4% of value when redeeming miles. That ends up being an extra $100-400 in potential value on that same $10,000 tax bill.

Paying State taxes – The credit card fees will vary from state to state. Check with your state tax authority. You may also be able to pay for things like property taxes on your credit card. Be sure to check with your local assessor to see what fees you will incur there. The higher the fees, the less likely putting taxes on a credit card will make sense.

Will you be able to pay the bill without accruing interest?

If you end up with a surprisingly large tax bill it might be tempting to whip out the credit card. If you will not be able to pay the bill off in full before owing interest, you could end up paying thousands of dollars in credit card interest charges. Keep in mind that the IRS does offer payment plans with an interest rate that is generally much lower than typical credit card interest rates.(wholesale restaurant supplies nyc)

Paying the IRS on a payment plan will mean you pay extra interest and penalties. All totaled, this will be about ½ to ¼ of what many credit cards would charge. Would you rather pay back a loan at an interest rate of say 6-7%, per year, or 15-30%, per year?

The caveat here is there are upfront costs to set up a payment plan with the IRS. So, if you have a low-interest credit card or you are confident you can pay off the debt in a month or two you may come out ahead by putting it on a credit card. Crunch the numbers and be 100% sure you can get it paid off quickly. Once the tax bill is on a credit card, the opportunity to set up a payment plan with the IRS will be lost.

Mileage Junkies Can Win Big with Credit Cards

If you are a mileage junkie, churning through credit cards to rack up sign up bonuses, tax payments may be a good way to hit those pesky spending thresholds. Let’s say you get a new AMEX and have to spend $5,000 in the first 3 months. Paying your taxes with that card could be a way to get a generous sign up bonus. The bonuses often range from 50,000-100,000 miles/points whatever benefit corresponds with the card.

For me it comes down to aircraft regular customer status. I fly a bit, yet insufficient to have top level status. Hitting spend edges on my Visas gives me an additional 30,000 emblem qualifying miles which helps knock me up a status level. I need to pay a 1.87% Visa handling expense to have the capacity to pay my assessments with a Visa. This expense will generally mean any esteem I collect from miles will be a wash. It is the limit rewards that puts me ahead. My charge card gives me extra BONUS miles on the off chance that I spend over specific levels consistently. This skews the math for utilizing a Visa in any event for my situation.(wholesale restaurant supplies nyc)

We utilized miles and wound up getting great over 1.87 pennies for every mile of significant worth. The accommodation of paying with a Visa is decent however sending a check each quarter isn’t that huge of an arrangement or inconvenience.  Lie level seats are luring, yet this decision won’t function admirably for everybody.

If you are saving up for a big trip, and just need a few extra miles, it may be worth the hassle to use a credit card just to get over the hump and have enough miles to buy that ticket. I’m picturing an engaged couple needing a few extra miles for a dream honeymoon.

Where does this all leave you?

The bottom line is if you are just trying to keep things simple, pay with a check or bank transfer. If you handle your money well and love to travel, this extra spending might just get you onto your next big trip faster. Just make sure you aren’t racking up credit card interest. Otherwise you may have the miles to fly, but you won’t have any money left to eat today, or while traveling

(wholesale restaurant supplies nyc)

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