It’s tax season again, and like many Americans, you’ve probably made an appointment with your tax professional or are doing your taxes yourself says Aron Govil. As you work on your taxes, you may be surprised when they are completed at the amount of money that you owe to the IRS. If this is not a familiar situation for you, congratulations! One option that many taxpayers have decided to use in recent years is offsetting tax liability with credit card cashback rewards or miles/points. This strategy works especially well for individuals who travel frequently and can benefit from charging their expenses to an airline reward credit card. It essentially allows consumers the opportunity to pay their taxes with “free” money.
Of course, there’s no such thing as free money – it just feels that way when your purchase pays off in points or cash back. So how does this process actually work?
Let us walk you through some steps that you can take to offset tax liability with points or cash back!
Do your homework. Read through our list of cards that offer rewards for taxes paid. Locate the ones most appropriate for your situation, and research the terms and conditions associated with each card (for example, what counts as a “travel” expense). Be sure to read over these terms carefully so that you know what fees might apply if you cancel your card later on. Once you’ve chosen the best credit card option for your needs, move on to step two.
Get familiar with the IRS website where you’ll be filing. The IRS is now offering an official payment application that allows taxpayers to pay their balance due using eligible MasterCard® debit cards, Visa® debit cards, and prepaid cards says Aron Govil. When making a payment through this service, you’ll need to enter the credit card number, expiration date, and three-digit security code found on the front of your card or on your receipt in order to complete the transaction and receive confirmation that your taxes have been paid.
Be aware of any minimum purchase requirements for cash-back offers. Aron Govil says to make sure that any amount due is compatible with your spending limit so you don’t lose out on opportunities for rewards! For example: If you need at least $1 in order to receive cashback from an offer, make sure not to pay anything less than $111 ($1 x 11 months = $11) when using this method for tax payment.
Don’t forget to leave time for delivery! In some cases, it may take as long as 7-10 business days for the credit card company to process your request and deposit funds back onto your account. This means you should allow yourself at least two weeks in order to avoid any overdraft fees. Also keep in mind that there are often daily limits associated with cash back offers – so you might not be able to withdraw all of your cash at once.
Do it! Once you’ve determined which offer is best for you, go ahead and make sure that the balance due on your taxes is compatible with what has been advertised by taking advantage of this unique opportunity to use credit card rewards or miles/points to pay off tax liability!
Here are 5 Tips for Improving Cash Position and Managing Expenses: – How to Pay Taxes with Credit Card Rewards. – Tax Payment Made Practically Painless
1. If you have bad credit, are new to credit, are near or under bankruptcy or foreclosure, etc., leave this method of tax payment for now until your situation’s improved.
2. If there is any chance that you’ll need quick access to the cashback option associated with a particular offer (for example, if you expect an unforeseen expense), don’t opt for this strategy as it might not be available in time when needed most.
3. Be sure to choose a card with benefits that will contribute to your everyday life. Such as airline miles cards, hotel rewards cards, and more. Don’t forget to review the best cards for bad credit. In order to get start swith building or rebuilding your credit!
4. Look into business tax payment options if you need an invoice or will be filing for a corporation of some kind.
5. Don’t make any purchases through this method of tax payment. If they are not strictly require – unless, of course, there is a significant cash back associate. With the purchase that will offset any potential fees. For example, making regular monthly contributions to your retirement account will not help pay off tax liability at all. But it may be worthy of a rewards card purchase since you’re earning extra points or cashback on everyday spending anyway.
It is always best to avoid missing tax deadlines. But the reality of the situation is that it happens often says Aron Govil. The good news here is that you can take advantage of credit card rewards or miles/points to pay off tax liability!