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Answers (11)

How to avoid IRS credit card fees

How to avoid IRS credit card fees

  1. Anonymous

    Now that it’s tax season there are a lot of new opportunities to meet credit card spending requirements by using new credit cards to pay your taxes. Unfortunately the IRS charges a fee to pay taxes with a credit card (the lowest fee is 1.87%) so for example if you have to pay $10,000 in taxes you will pay $187 in fees. Are there any “hacks” that perhaps bring down the cost to use a credit card for paying taxes or a third party processor that doesn’t charge a fee?

  2. MidSouthSkier

    Greg, aka Frequent Miler, does at least one post on this topic every year. Here’s one from this year and there may be more: [URL]http://frequentmiler.boardingarea.com/2016/03/17/top-5-reasons-to-pay-federal-taxes-with-a-credit-card-or-gift-card/[/URL]

  3. Gaurav

    I believe the cheapest was actually plastiq at 1.75 but you would have had to initiate payment a week or so ago. I think all payment facilitators charge a fee, it’s just a question of finding the cheapest one and paying with a card that covers the percentage.

  4. Anonymous

    Ben wrote on this too: [URL]http://onemileatatime.boardingarea.com/2016/03/15/pay-taxes-credit-card/[/URL]

    But really, no tricks — you pretty much have to pay a fee.

  5. PhatMiles

    Apart from all what has been said above, I think a longer way to avoid fees is:
    [I]Not sure if this works or not, just a thought.[/I]
    1. Apply for a PayPal debit card
    2. Use the right card to buy PayPal cash cards at the right place.
    [I]PayPal cash cards are available at a variety of places like drug stores, grocery stores, gas stations etc. Buy the cash cards with a credit card that offers a category bonus. For eg, Citi TY Premier offers 3X at gas stations.[/I]
    3. Since the fee is very minimal when paying with a debit card, it works out very well.

    Few things, I would consider:
    You cannot try this for this year since only 2 more days to go.
    If trying in the future, be cautious about PayPal. If you load a lot of money they may start an inquiry. Consider the load and card limits on PayPal.
    Pay your taxes ASAP next year this way. If something goes wrong, you will have some buffer period to iron out issues.

  6. Tandroy Foty

    [QUOTE=”PhatMiles, post: 15693, member: 522″]Apart from all what has been said above, I think a longer way to avoid fees is:
    [I]Not sure if this works or not, just a thought.[/I]
    1. Apply for a PayPal debit card
    2. Use the right card to buy PayPal cash cards at the right place.
    [I]PayPal cash cards are available at a variety of places like drug stores, grocery stores, gas stations etc. Buy the cash cards with a credit card that offers a category bonus. For eg, Citi TY Premier offers 3X at gas stations.[/I]
    3. Since the fee is very minimal when paying with a debit card, it works out very well.

    Few things, I would consider:
    You cannot try this for this year since only 2 more days to go.
    If trying in the future, be cautious about PayPal. If you load a lot of money they may start an inquiry. Consider the load and card limits on PayPal.
    Pay your taxes ASAP next year this way. If something goes wrong, you will have some buffer period to iron out issues.[/QUOTE]

    Yeah, this is precisely what I’m doing. $4000/month, $500/day is the limit. I’ve also found that I have to explain to every single person behind the counter that you can, in fact, reload PayPal MyCash with a credit card. It’s quite the ordeal until they get to know you. Also, the 1% cash back offered by PayPal should recoup the $2 debit card fee, plus the $3.95 fee to purchase each PayPal reload. At the end of the day you get all the miles, plus a couple extra dollars, meaning it’s even worth using a card that doesn’t offer 2-1 miles, like Barclaycard.

  7. Tandroy Foty

    [QUOTE=”Tandroy Foty, post: 15700, member: 591″]Yeah, this is precisely what I’m doing. $4000/month, $500/day is the limit. I’ve also found that I have to explain to every single person behind the counter that you can, in fact, reload PayPal MyCash with a credit card. It’s quite the ordeal until they get to know you. Also, the 1% cash back offered by PayPal should recoup the $2 debit card fee, plus the $3.95 fee to purchase each PayPal reload. At the end of the day you get all the miles, plus a couple extra dollars, meaning it’s even worth using a card that doesn’t offer 2-1 miles, like Barclaycard.[/QUOTE]
    [ATTACH=full]96[/ATTACH]

  8. Gaurav

    It’s a very appealing option to be sure but be aware that there are numerous reports of PayPal accounts being shut down for this behavior. If you’re going to do this proceed with caution, don’t try to max limits and be ok if the account is shut down (have alternate options for future transactions on places like ebay and enough of a float because PayPal often holds funds for months before release).

  9. Tandroy Foty

    [QUOTE=”Gaurav, post: 15703, member: 79″]It’s a very appealing option to be sure but be aware that there are numerous reports of PayPal accounts being shut down for this behavior. If you’re going to do this proceed with caution, don’t try to max limits and be ok if the account is shut down (have alternate options for future transactions on places like ebay and enough of a float because PayPal often holds funds for months before release).[/QUOTE]

    For what behavior? I know there are reports of shutting down if you transfer the money directly back to your bank account, but putting money on PayPal and then paying for whatever service you choose with their Debit Card is precisely the point of PayPal MyCash, isn’t it? What would be the violation of terms and service?

  10. Gaurav

    [USER=591]@Tandroy Foty[/USER], none of it is a violation of the TOS. Nobody is violating Serve or Redcard or Bluebird or PayPal terms of service and yet people get shut down all the time. Depositing money with mycash and using it to pay bills and withdrawing it to your bank account are too conceptually similar for me at least.

    With that said, everyone’s appetite for risk is different and people should do what they feel comfortable with as long as they have researched options and are aware of potential downsides. I would hate to be a newcomer to the this hobby who needs thousands of dollars to pay their IRS tax bill and suddenly has PayPal saying I think we’re going to hold on to your money for six months.

  11. Tandroy Foty

    Oh, well, if they shut it down for not violating ToS, that’s another issue entirely. Also, there’s a $3000 daily spending limit on the PayPal business Debit Card. That would’ve been helpful to know beforehand. Regardless, I’ve paid off my taxes with it and haven’t had any problems. For those that want to try it next year.

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