Intentionally Paying Too Much Taxes to Buy I Bonds

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MishkaWorries
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Intentionally Paying Too Much Taxes to Buy I Bonds

Post by MishkaWorries »

I've been thinking about buying i bonds since there's so little interest being paid. But I'm also in the process of consolidating accounts and I don't want to add another account at the Treasury.

Then I saw a thread about paying taxes with a credit card. That got me thinking.

Can I make an estimated tax payment of $5,000 towards my 2020 taxes and use my 2% back credit card? I have no basis to believe I owe that extra $5,000. I would just be doing that so I could get $5,000 i bonds with my tax return.

That seems sketchy. Is there any ethical or legal reasons not to do that?
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fabdog
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by fabdog »

No rule against it. The government will be happy to hold your money till you file your taxes.

The fees on paying estimated taxes with the card may be more than the rewards you'd get, but that's a different topic

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protagonist
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by protagonist »

Ethical or legal? I can't imagine why. If you have a credit card that would pay you back 2% on a tax payment I would love to know about that. I doubt if it would. I don't think that the credit cards I know that offer incentives like that would do so for a tax payment, but I could be wrong. Read the fine print. Plus the IRS might charge more than 2% for use of the card.
I overpaid my 2020 taxes by at least $5K in 2020 so that I could get the refund in I-bonds. I think I-bonds are always worth it. The government can sit on my $5K for 6 or 9 months while I lose 1% interest if that much....no problem.
Last edited by protagonist on Tue Jan 12, 2021 7:36 pm, edited 1 time in total.
Topic Author
MishkaWorries
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by MishkaWorries »

I admit I didn't read the paying taxes with a credit card thtead :P so the 2% back isn't going to happen.

Still the I bond idea appeals to me but it looks like estimated taxes are due by January 15 so I don't have time to make a decision this year.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by tibbitts »

MishkaWorries wrote: Tue Jan 12, 2021 7:34 pm I admit I didn't read the paying taxes with a credit card thtead :P so the 2% back isn't going to happen.

Still the I bond idea appeals to me but it looks like estimated taxes are due by January 15 so I don't have time to make a decision this year.
Is it not possible to pay estimated taxes for Q4 late, via any of the e-payment systems? I've never tried, just asking.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by anon_investor »

MishkaWorries wrote: Tue Jan 12, 2021 7:34 pm I admit I didn't read the paying taxes with a credit card thtead :P so the 2% back isn't going to happen.

Still the I bond idea appeals to me but it looks like estimated taxes are due by January 15 so I don't have time to make a decision this year.
You can always file an extension and include an extra payment.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by protagonist »

MishkaWorries wrote: Tue Jan 12, 2021 7:34 pm I admit I didn't read the paying taxes with a credit card thtead :P so the 2% back isn't going to happen.

Still the I bond idea appeals to me but it looks like estimated taxes are due by January 15 so I don't have time to make a decision this year.
My recollection is that I made my estimated payment for 2019 taxes after Jan 15, 2020 but before I filed my 2019 return in April, 2020 and I got my refund in I-bonds. I don't recall exactly how I did it. If you have difficulty doing it and you don't have sufficient funds to overpay between now and Jan 15, you might ask about that in a separate thread.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by cookymonster »

This is what I’ve done this year for the first time. Overpaid by about $10k hoping to get a $5k ibond. Credit card reward is 2.625% at BoA and the processing fee is 1.99%.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by Angst »

MishkaWorries wrote: Tue Jan 12, 2021 7:34 pm Still the I bond idea appeals to me but it looks like estimated taxes are due by January 15 so I don't have time to make a decision this year.
It's the due taxes that are due by the 15th. If you're simply overpaying ahead of time with the 4th qtr tax payment, there's nothing due that's going to be "late". I've done it before, i.e. mailed in the 4th qtr prepayment "late" but not actually owing anything on it, and the Treasury accepts it and you have a positive balance on April 15th for your I Bonds. You're not "late".
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by tomsense76 »

anon_investor wrote: Tue Jan 12, 2021 7:38 pm
MishkaWorries wrote: Tue Jan 12, 2021 7:34 pm I admit I didn't read the paying taxes with a credit card thtead :P so the 2% back isn't going to happen.

Still the I bond idea appeals to me but it looks like estimated taxes are due by January 15 so I don't have time to make a decision this year.
You can always file an extension and include an extra payment.
^ This. It's how I plan to do it this year.

Should add I usually add a little money to the extension every year even if I don't think I owe just in case. The IRS has never complained. Interestingly enough VA did once (more accurately they got confused as how to handle it initially, but it all worked out in the end).
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by obafgkm »

cookymonster wrote: Tue Jan 12, 2021 9:25 pm This is what I’ve done this year for the first time. Overpaid by about $10k hoping to get a $5k ibond.
Unfortunately, you won't be getting a $5000 I Savings Bond. From Using Your Income Tax Refund to Buy Paper Savings Bonds at Treasury Direct (TD):
What denominations are available?

Paper I bonds are issued in denominations of $50, $100, $200, $500, and $1,000, depending on the amount you request.

If you buy $250 or less of savings bonds, we will use $50 denominations to fill your order.

If you buy more than $250 of savings bonds, we will use $50 denominations to fill the first $250 and the fewest possible number of additional bonds for the remainder. For example, if you request $1,000 in paper I bonds, you will receive six $50 bonds, one $200 bond, and one $500 bond.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by TravelGeek »

protagonist wrote: Tue Jan 12, 2021 7:28 pm Ethical or legal? I can't imagine why. If you have a credit card that would pay you back 2% on a tax payment I would love to know about that. I doubt if it would. I don't think that the credit cards I know that offer incentives like that would do so for a tax payment, but I could be wrong. Read the fine print. Plus the IRS might charge more than 2% for use of the card.
See viewtopic.php?p=5731674
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by Mudpuppy »

MishkaWorries wrote: Tue Jan 12, 2021 7:22 pm Can I make an estimated tax payment of $5,000 towards my 2020 taxes and use my 2% back credit card? I have no basis to believe I owe that extra $5,000. I would just be doing that so I could get $5,000 i bonds with my tax return.

That seems sketchy. Is there any ethical or legal reasons not to do that?
It is possible to overpay your taxes with the hopes of getting I-Bonds as a refund. It is perfectly legal to do so. Others have already pointed out the issues with using a credit card for payment.

An issue that has not yet been pointed out is the risk of not being given your refund in I-Bonds. Any issues with the calculation of taxes owed can result in the entire refund coming via check or direct deposit, instead of getting I-Bonds. Reference the following thread for how that happened in the past tax year: viewtopic.php?f=2&t=321142&p=5393201
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by bhtomj »

TFB (The Finance Buff) posted Monday on this topic:
https://thefinancebuff.com/blog
neb2020
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by neb2020 »

Do you need to max out your $10k i-Bond allocation first?

In other words, if I get a $5k i-Bond refund, can I still buy another $10k i-Bond on Treasury Direct after I get the refund?
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by ivgrivchuck »

anon_investor wrote: Tue Jan 12, 2021 7:38 pm
MishkaWorries wrote: Tue Jan 12, 2021 7:34 pm I admit I didn't read the paying taxes with a credit card thtead :P so the 2% back isn't going to happen.

Still the I bond idea appeals to me but it looks like estimated taxes are due by January 15 so I don't have time to make a decision this year.
You can always file an extension and include an extra payment.
+1

This is the best way.
45% VTI | 35% VXUS | 10% I-bonds | 10% EE-bonds
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by Jack FFR1846 »

This is simply a good idea. Citi double cash and Fidelity 2% cards will both give you 2% on the payment. Getting paper bonds allows you to have bonds without having to deal with Treasury Direct ever. When it's time to cash out, simply ask your local B&M bank or credit union about it. It's not that hard to find a place to cash them. I use DCU (Digital Credit Union) and have cashed as much as $50k in a single transaction with no problems, the cash not only in my account before I'm out the door but available.

I'm a huge paper savings bond fan.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by cookymonster »

obafgkm wrote: Tue Jan 12, 2021 10:16 pm
cookymonster wrote: Tue Jan 12, 2021 9:25 pm This is what I’ve done this year for the first time. Overpaid by about $10k hoping to get a $5k ibond.
Unfortunately, you won't be getting a $5000 I Savings Bond. From Using Your Income Tax Refund to Buy Paper Savings Bonds at Treasury Direct (TD):
What denominations are available?

Paper I bonds are issued in denominations of $50, $100, $200, $500, and $1,000, depending on the amount you request.

If you buy $250 or less of savings bonds, we will use $50 denominations to fill your order.

If you buy more than $250 of savings bonds, we will use $50 denominations to fill the first $250 and the fewest possible number of additional bonds for the remainder. For example, if you request $1,000 in paper I bonds, you will receive six $50 bonds, one $200 bond, and one $500 bond.
So that’s twelve separate bonds? 4 x $1000, 1 x $500, 1 x $200, and 6 x $50? Considering I plan to hold on to these for decades, that’s not really ideal.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by JackoC »

TravelGeek wrote: Tue Jan 12, 2021 10:18 pm
protagonist wrote: Tue Jan 12, 2021 7:28 pm Ethical or legal? I can't imagine why. If you have a credit card that would pay you back 2% on a tax payment I would love to know about that. I doubt if it would. I don't think that the credit cards I know that offer incentives like that would do so for a tax payment, but I could be wrong. Read the fine print. Plus the IRS might charge more than 2% for use of the card.
See viewtopic.php?p=5731674
For anyone else who prefers a simple answer to a link without comment, yes you're mistaken. I don't know of a credit card which would differentiate and *not* give you the normal cash back on an estimated tax payment. Since the cheapest convenience fee now to pay federal taxes by CC is 1.96% at payUSAtax* and BOA Preferred Rewards card pays 2.625% at 'platinum honors' level, and you get cash back on the convenience fee too, there's a net savings of 1-1.0196*(1-.02625)=0.72%. I now always do it that way: it doesn't take any more time than methods that would net me zero. Likewise if you're good with (or even prefer) paper I-bonds you can overpay $5k on purpose with CC. I've done this for kids.

*lowest was 1.87% at Pay1040.com at the time of the linked thread, they recently raised their price to 1.99%. Subject to minimums on small payments.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by obafgkm »

cookymonster wrote: Wed Jan 13, 2021 10:47 am So that’s twelve separate bonds? 4 x $1000, 1 x $500, 1 x $200, and 6 x $50? Considering I plan to hold on to these for decades, that’s not really ideal.
It's not so bad. I have photographs of the bonds (for the serial numbers) electronically stored in two safe places, the serial numbers are stored on paper elsewhere, and the originals are in my safe deposit box.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by obafgkm »

bhtomj wrote: Tue Jan 12, 2021 11:48 pm TFB (The Finance Buff) posted Monday on this topic:
https://thefinancebuff.com/blog
Here is a direct link to the post (the above link will not be good after the next post on the blog).
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by protagonist »

TravelGeek wrote: Tue Jan 12, 2021 10:18 pm
protagonist wrote: Tue Jan 12, 2021 7:28 pm Ethical or legal? I can't imagine why. If you have a credit card that would pay you back 2% on a tax payment I would love to know about that. I doubt if it would. I don't think that the credit cards I know that offer incentives like that would do so for a tax payment, but I could be wrong. Read the fine print. Plus the IRS might charge more than 2% for use of the card.
See viewtopic.php?p=5731674
Interesting. I stand corrected.

"As of March 2019, the lowest fee for a credit card is 1.87%....
You can also use Plastiq.com for a 2.5% fee but that is unlikely to be the best rate unless they are running a reduced fee promotion."

At 2% back the "lowest fee" quoted would leave you with 0.13% back vs. paying cash, or $1.30 per thousand. Unless you are paying a REALLY huge tax bill, and have a huge amount of credit to cover it, that seems hardly worth it. Even at $2.625 back that is still only about $7-8 back per thousand.
And though the OP mentioned the 5% Paypal quarter on the Freedom card, which would have worked Sept-Dec, that maxes out at $1500 spend (which could probably be easily achieved anyway via Amazon and Paypal without paying taxes).


Other ideas were also bantered around, but they seem rather convoluted for the level of benefit for those who value their time. Perhaps I am wrong....I didn't read the whole thread since I have no intention of paying my taxes by credit card.
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MishkaWorries
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by MishkaWorries »

obafgkm wrote: Tue Jan 12, 2021 10:16 pm Using Your Income Tax Refund to Buy Paper Savings Bonds at Treasury Direct (TD):
What denominations are available?

Paper I bonds are issued in denominations of $50, $100, $200, $500, and $1,000, depending on the amount you request.

If you buy $250 or less of savings bonds, we will use $50 denominations to fill your order.

If you buy more than $250 of savings bonds, we will use $50 denominations to fill the first $250 and the fewest possible number of additional bonds for the remainder. For example, if you request $1,000 in paper I bonds, you will receive six $50 bonds, one $200 bond, and one $500 bond.
Now that is a plan only a government bureaucrat could love. :shock:
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MishkaWorries
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by MishkaWorries »

bhtomj wrote: Tue Jan 12, 2021 11:48 pm TFB (The Finance Buff) posted Monday on this topic:
https://thefinancebuff.com/blog
Thanks all for your input and thanks for this link. That's a good website.

Its not so complicated after all. I'm going to skip the credit card payment. No benefit to pay 1.99% fee to credit 2% cash back.

I'll make a 2020 tax payment of $5,000 to IRS Direct Pay and that will get me an automatic extension. Then I'll just do my taxes normally and request the refund in I bonds.

This place is great!
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by tibbitts »

obafgkm wrote: Wed Jan 13, 2021 12:37 pm
cookymonster wrote: Wed Jan 13, 2021 10:47 am So that’s twelve separate bonds? 4 x $1000, 1 x $500, 1 x $200, and 6 x $50? Considering I plan to hold on to these for decades, that’s not really ideal.
It's not so bad. I have photographs of the bonds (for the serial numbers) electronically stored in two safe places, the serial numbers are stored on paper elsewhere, and the originals are in my safe deposit box.
The primary problem with paper bonds is the need to do the mail-and-convert process to make registration changes, which might be somewhat frequent for some people.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by JackoC »

protagonist wrote: Wed Jan 13, 2021 5:02 pm
TravelGeek wrote: Tue Jan 12, 2021 10:18 pm
protagonist wrote: Tue Jan 12, 2021 7:28 pm Ethical or legal? I can't imagine why. If you have a credit card that would pay you back 2% on a tax payment I would love to know about that.
See viewtopic.php?p=5731674
Interesting. I stand corrected.

"As of March 2019, the lowest fee for a credit card is 1.87%....
You can also use Plastiq.com for a 2.5% fee but that is unlikely to be the best rate unless they are running a reduced fee promotion."

At 2% back the "lowest fee" quoted would leave you with 0.13% back vs. paying cash, or $1.30 per thousand. Unless you are paying a REALLY huge tax bill, and have a huge amount of credit to cover it, that seems hardly worth it. Even at $2.625 back that is still only about $7-8 back per thousand.

Other ideas were also bantered around, but they seem rather convoluted for the level of benefit for those who value their time. Perhaps I am wrong....I didn't read the whole thread since I have no intention of paying my taxes by credit card.
I also didn't read that whole thread so can't comment on the 'other ideas'. But as I said above with BOA Preferred Rewards/Platinum Honors level the saving at best current (not 2019) convenience fee of 1.96% v the cash back of 2.625% nets 0.72%, including the slight effect of cash back on the convenience fee.

This might be questionable if it actually took more time and effort, but it doesn't. You have to pay one way or another. It's not like opening a credit card or bank account just to get a small bonus, you could just not do that instead. Pulling up payUSAtax, filling it out and hitting pay definitely takes me less time than writing a check and addressing and stuffing an envelope with the payment voucher. I see it side by side because I still pay estimated tax on trust returns by check, AFAIK I can't do that online: it absolutely takes me longer per payment. And I don't see how it's more effort than pulling up something online where you'd enter a bank account number with no fee, but get no cash back. It's money for nothing at the margin, to me. How much money obviously depends on the amount (for really small amounts the $2. something minimum makes it a net cost). Including state est. taxes (at 2% conv fee) it nets me more than enough to do it if it took a little extra time, but it actually takes less.

The advantage of check over electronic debit is tax authority may not deposit it for days but it's 'on time' if post marked on the due date, though this is small with rates so low and none if a zero interest account. But check is not going to beat CC on either money or time, and there's also more float than a check (again small at today's rates) if you're willing to have a high closing balance on the card and pay ~45 days after you make the charge (I usually pay the card right away in today's situation). As long as it's not so large that the CC company clamps down on you for gaming them. Which they probably would at some level, but IME they tolerate payments in $10k range. I sometimes have gone back to checks for every large payments though, like one grown kid's balance due after a great year recently, I didn't want to risk getting the card cancelled by trying to pay the IRS >>$10k with CC and have him give me a check.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by protagonist »

JackoC wrote: Thu Jan 14, 2021 12:40 pm
protagonist wrote: Wed Jan 13, 2021 5:02 pm
TravelGeek wrote: Tue Jan 12, 2021 10:18 pm
protagonist wrote: Tue Jan 12, 2021 7:28 pm Ethical or legal? I can't imagine why. If you have a credit card that would pay you back 2% on a tax payment I would love to know about that.
See viewtopic.php?p=5731674
Interesting. I stand corrected.

"As of March 2019, the lowest fee for a credit card is 1.87%....
You can also use Plastiq.com for a 2.5% fee but that is unlikely to be the best rate unless they are running a reduced fee promotion."

At 2% back the "lowest fee" quoted would leave you with 0.13% back vs. paying cash, or $1.30 per thousand. Unless you are paying a REALLY huge tax bill, and have a huge amount of credit to cover it, that seems hardly worth it. Even at $2.625 back that is still only about $7-8 back per thousand.

Other ideas were also bantered around, but they seem rather convoluted for the level of benefit for those who value their time. Perhaps I am wrong....I didn't read the whole thread since I have no intention of paying my taxes by credit card.
I also didn't read that whole thread so can't comment on the 'other ideas'. But as I said above with BOA Preferred Rewards/Platinum Honors level the saving at best current (not 2019) convenience fee of 1.96% v the cash back of 2.625% nets 0.72%, including the slight effect of cash back on the convenience fee.

This might be questionable if it actually took more time and effort, but it doesn't. You have to pay one way or another. It's not like opening a credit card or bank account just to get a small bonus, you could just not do that instead. Pulling up payUSAtax, filling it out and hitting pay definitely takes me less time than writing a check and addressing and stuffing an envelope with the payment voucher. I see it side by side because I still pay estimated tax on trust returns by check, AFAIK I can't do that online: it absolutely takes me longer per payment. And I don't see how it's more effort than pulling up something online where you'd enter a bank account number with no fee, but get no cash back. It's money for nothing at the margin, to me. How much money obviously depends on the amount (for really small amounts the $2. something minimum makes it a net cost). Including state est. taxes (at 2% conv fee) it nets me more than enough to do it if it took a little extra time, but it actually takes less.

The advantage of check over electronic debit is tax authority may not deposit it for days but it's 'on time' if post marked on the due date, though this is small with rates so low and none if a zero interest account. But check is not going to beat CC on either money or time, and there's also more float than a check (again small at today's rates) if you're willing to have a high closing balance on the card and pay ~45 days after you make the charge (I usually pay the card right away in today's situation). As long as it's not so large that the CC company clamps down on you for gaming them. Which they probably would at some level, but IME they tolerate payments in $10k range. I sometimes have gone back to checks for every large payments though, like one grown kid's balance due after a great year recently, I didn't want to risk getting the card cancelled by trying to pay the IRS >>$10k with CC and have him give me a check.
So 0.72% on $10K nets you $72 with no effort. As per your explanation I guess I get that.
I don't know why your CC company would have issues with larger payments provided you had a large enough line of credit. After all, that is why they give you that line of credit.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by surfstar »

obafgkm wrote: Wed Jan 13, 2021 12:37 pm
cookymonster wrote: Wed Jan 13, 2021 10:47 am So that’s twelve separate bonds? 4 x $1000, 1 x $500, 1 x $200, and 6 x $50? Considering I plan to hold on to these for decades, that’s not really ideal.
It's not so bad. I have photographs of the bonds (for the serial numbers) electronically stored in two safe places, the serial numbers are stored on paper elsewhere, and the originals are in my safe deposit box.
That seems worse than just using a Treasury Direct account *shrug*
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by protagonist »

surfstar wrote: Fri Jan 15, 2021 1:44 pm
obafgkm wrote: Wed Jan 13, 2021 12:37 pm
cookymonster wrote: Wed Jan 13, 2021 10:47 am So that’s twelve separate bonds? 4 x $1000, 1 x $500, 1 x $200, and 6 x $50? Considering I plan to hold on to these for decades, that’s not really ideal.
It's not so bad. I have photographs of the bonds (for the serial numbers) electronically stored in two safe places, the serial numbers are stored on paper elsewhere, and the originals are in my safe deposit box.
That seems worse than just using a Treasury Direct account *shrug*
The bonds can be mailed in and converted to your TD account. That said, the process is rather cumbersome. I keep telling myself I will do it some day *laughing* I have at least 5-10 years of paper I-bonds I acquired via this method that I should convert.
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by SnowBog »

MishkaWorries wrote: Wed Jan 13, 2021 6:35 pm
bhtomj wrote: Tue Jan 12, 2021 11:48 pm TFB (The Finance Buff) posted Monday on this topic:
https://thefinancebuff.com/blog
Thanks all for your input and thanks for this link. That's a good website.

Its not so complicated after all. I'm going to skip the credit card payment. No benefit to pay 1.99% fee to credit 2% cash back.

I'll make a 2020 tax payment of $5,000 to IRS Direct Pay and that will get me an automatic extension. Then I'll just do my taxes normally and request the refund in I bonds.

This place is great!
For clarity, you'd want to pay $5000 more than you owe.

So it might be better to figure your taxes as normal, then add $5000 (or maybe slightly more just to make sure), and pay that amount with your extension.
Brian2d
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by Brian2d »

With IRS issues around Covid is there added risk this year that i-bonds could either be delayed or not processed correctly?
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by Escape Velocity »

I didn't see this mentioned in the above thread (and maybe it's a dumb idea), but ...

Can I just list the delta amount of my overpayment (to net out at a $5000 refund for iBonds) as having been paid on the date I file my paper-based taxes, and include a paper check, so dated, for that amount?

One reason I'd like to do that is that I'll know they've received the taxes and at least have opened them, once the check has cleared.

Thanks, EV

EDIT: Ended up checking out the other thread by Harry Sit, and asked a similar question there. Per two replies, this was, indeed, a bad idea :oops:

The point was that IRS might not accept a payment without an accompanying form, so at this late date, best approach is just to file an extension and include the extra payment with that. Simple, and will work for sure. :beer
Last edited by Escape Velocity on Sun Feb 28, 2021 1:05 am, edited 3 times in total.
aschafer1984
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Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by aschafer1984 »

SnowBog wrote: Fri Jan 15, 2021 11:56 pm
MishkaWorries wrote: Wed Jan 13, 2021 6:35 pm
bhtomj wrote: Tue Jan 12, 2021 11:48 pm TFB (The Finance Buff) posted Monday on this topic:
https://thefinancebuff.com/blog
Thanks all for your input and thanks for this link. That's a good website.

Its not so complicated after all. I'm going to skip the credit card payment. No benefit to pay 1.99% fee to credit 2% cash back.

I'll make a 2020 tax payment of $5,000 to IRS Direct Pay and that will get me an automatic extension. Then I'll just do my taxes normally and request the refund in I bonds.

This place is great!
For clarity, you'd want to pay $5000 more than you owe.

So it might be better to figure your taxes as normal, then add $5000 (or maybe slightly more just to make sure), and pay that amount with your extension.
This is great. Is there a minimum amount of time one should wait between submitting the extra payment on the IRS Direct Pay site and actually submitting your tax return (via Turbo Tax)? Say waiting a week or so to ensure the payment has cleared?
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obafgkm
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Location: Pennsylvania

Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by obafgkm »

aschafer1984 wrote: Sat Feb 27, 2021 10:09 pm This is great. Is there a minimum amount of time one should wait between submitting the extra payment on the IRS Direct Pay site and actually submitting your tax return (via Turbo Tax)? Say waiting a week or so to ensure the payment has cleared?
I paid extra for the first time this year with an "extension". I filed an extension on February 9, 2021. The money was taken out of my credit union account the same day, and showed up by February 12, 2021 when I checked the IRS online.

I submitted my taxes electronically on February 13, and received the amount over $5000 on February 18, 2021. I received $4000 of my $5000 in savings bonds February 27. (of course the one bond that didn't come was a $1000 one :annoyed).
boridi
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Joined: Sun Jul 14, 2013 1:33 pm

Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by boridi »

I buy $500 Visa Gift Cards at grocery stores with an Amex Blue Cash Preferred and then use them to pay taxes.

Amex BCP gets 6% back at grocery stores. $500 VGC has $5.95 fee

6% back on 505.95 = $30.36
VGC fee = 5.95
Debit card fee at payusatax/pay1040 = $2.5

30.36 -5.95 -2.5= 22

$22 cash back on $500 tax payment (not accounting for the annual fee of Amex BCP). Technically you have to do a $495 payment since the debit card fee gets taken out at the same time.
Last edited by boridi on Sun Feb 28, 2021 10:13 am, edited 1 time in total.
dukeblue219
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Joined: Fri Jan 29, 2016 12:40 pm

Re: Intentionally Paying Too Much Taxes to Buy I Bonds

Post by dukeblue219 »

On the CC cash back thing, the actual cash back isn't THAT great after fees but it's a prime opportunity to apply for a new card with a good bonus offer. You can knock out a $3k minimum spend, net a few bucks (or not) in rewards, and then a $200 bonus or whatever.

Not worth the hassle for everyone, of course, but then again neither is buying $5k worth of paper I bonds.
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