Which Credit Card Should I Use to Pay Tax Debt?

I loathe getting mail. To the point, I will let mail sit for days without opening it. Mail is a serious buzzkill. A majority of the mail I receive is in the form of bills, credit card offers, and shopping ads (not the most glamorous list). There are occasions, however, when I get a refund or birthday card which make me happy. Well, I am about to tell you about the not so happy drama that has been unfolding between the Internal Revenue Service (IRS) and myself for the past few months.

IRS Logo

December 28, 2018

In the midst of the government shutdown, I received a letter from the IRS. I found it odd the agency still had people working during the shutdown. What could this be? It could only be one thing, a notice saying there would be a delay filing taxes, right? Wrong. The letter stated I owed a debt to the United States Treasury for the 2017 tax season. Not the taxes I filed in February 2018…

Not only did I owe a debt to the government, interest was accruing daily on it. In addition to the interest accrual, the letter stated I owed an “accuracy related” penalty. I owed three things in all: tax difference from 2017, accuracy related penalty, and interest accrued. Merry Christmas to me.

The letter closed by reiterating that it was not a finalized debt. This meant I had 30 days to submit a formal request to lower the amount or make a payment.

January 25, 2019

I submitted a rebuttal to the IRS, which included my W-2, retirement account statements, and a memorandum outlining my concerns. The memorandum highlighted that I withdrew money from a 401K and was sure I clicked “10% federal withholding”. I did not have the old paperwork from 2017 so it was my word versus the IRS’ at this point.

February 19, 2019

I received a letter from the IRS stating that they received my rebuttal and should receive a response within 30 days. Oh yeah, interest was still accruing.

March 28, 2019

The IRS sent me a letter stating that they considered all of the documents in my rebuttal, but the decision was final. There was not another appeal process or anyone I could talk to about the debt. The letter went on to state that a payment was needed and the payment letter would be forthcoming. Interest was still accruing…

May 7, 2019

I received the letter from the IRS outlining the payment. I had less than two weeks to make a payment. Below are the payments options:

Payment Options

Pay the debt directly using a checking or savings account:

IRS Repayment Options

Pay the debt in full using one of these options:

IRS Repayment Options

IRS Repayment Options

Or set up a payment plan (if qualified):

IRS Repayment Options

I knew there was only one option (#2) for me to pay this debt, a rewards credit card. There are quite a few credit cards in my wallet at the moment, but only one will get maximum cash back/points in return…the Chase Freedom Unlimited card. I chose this card because it offers 1.5% cash back on purchases. I can transfer the “cash back” to the Chase Sapphire Preferred card in Chase Ultimate Rewards to use the points towards an airline ticket. If I did not have the Sapphire card, I could not turn the cash back into airline points. This would minimize my return and force me to use another rewards card.

Final Word

It stinks being hit with a bill, especially a tax bill. I thought that I had done everything correctly when I filed my taxes, boy was I wrong. This mistake is going to cost me extra money in interest and a penalty, but I will make some of it back by using the Chase Freedom Unlimited card. Oh yeah, I should be able to write some of the debt off on my taxes next year.








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