If you are getting a tax refund [1], you can take advantage of deals to boost your refund like the Amazon 10% Bonus on Your Federal Tax Refund [2].
However, if you owe taxes, then you might have to look a little harder to find a good deal… but the good news is they do exist!
I’ve outlined in the past how to Pay Taxes with Credit Cards to Earn Cash Back [3], but what if the processing fees are higher than your cashback? Or if they’re so close it’s not worth the trouble? Here’s a workaround I used this week to earn 3.3% cash back on a tax payment.
Buy American Express Gift Cards
- Login to your TopCashBack [4] account.
- Search for: American Express® Gift Cards & Business Gift Cards.
- Select 3% cash back (available this week).
- Purchase your Amex Gift card using the promo code FSEMP14 for free shipping.
Pay Your Taxes
- Go to Pay USA Tax [5].
- Use your American Express Gift Card to make your payment.
- Pay your tax and a credit card convenience fee of 1.87%.
Credit Card Cash Back
Meet Spending Requirements. This strategy is a great way to meet spending requirements on new bonus cards [6]. I needed to hit some spending requirements on various cards from my $1,720 + 267k Point Credit Card Application Spree [7], including my new British Air and Virgin Atlantic cards.
Maximize Cash Back. If you aren’t working on a spending bonus and you want to maximize the cash back, pick your favorite card with the maximum cash back. Mine highest cashback card for everyday spending is currently the Barclaycard Arrival card [8].
Do The Math
Here’s how the math broke down for me. I purchased 3 x $3000 gift cards worth $9000:
- American Express Fees of $3.95 x 3 = $11.85
- Top Cash Back: $269.46
- Tax Payments: $2944.93 x 3 = $8834.79
- Pay USA Tax Fees of $55.07 x 3 = $165.21
While I spread my purchases across the various cards (for spending bonuses), to make the calculations more straight forward and easy for you to replicate, let’s assume I put all the charges on the Barclaycard Arrival card [8], then it would be worth: 18022 miles, which is redeemable for [9] $180 in travel credits to earn an additional $18 in rewards.
Total Profit:
- Rewards: 269.46 + 198 = $467.46
- Fees: 11.85 + 165.21 = $177.06
- Profit: $290.40
Total Cash Back on Tax Payments: 290.40 / 8834.79 = 3.3%
In the Future
If you aren’t ready to pay your taxes yet, and probably won’t be ready until the tax deadline [10], you can still take advantage of the deal, but the numbers might be slightly different.
The cash back percentages at TopCashBack [4] routinely change. You can use Cash Back Monitor [11] to find the highest paying cashback website at the time of purchase to make sure you maximize your deal.
Which Cards to Use
You need to make sure that your credit card won’t be charged a cash advance when buying American Express Gift Cards. In other words, avoid Citi cards and US Bank cards. I used Chase, Bank of America, and Barclays without problems this month. And obviously, Amex will count it as a purchase since they are selling the product. However, to be sure, you can lower your cash advance limit to $0 on any card before making the purchases.