Are you trying to get your taxes in order before the April 15th deadline? So many Americans are looking through their invoices and receipts to find additional deductions, yet one of the easiest places to look for this information may be your credit card accounts.
How Credit Cards Can Help You Find Deductions
The simplest way to find potential deductions is to go through your credit card's paper statements. Unfortunately, this will be the most time consuming method for all but the most organized people. Thankfully, most credit card issuers will make your statements available online for at least a year. In addition, many credit card issuers will offer year end reports that allow you to sort through all of your statements in one place.
You can go through these statements and look for charitable contributions, deductible expenses related to your job, or costs that you might have incurred running a small business. Other deductible expenses could include moving costs, medical expenses, or job hunting expenses. In addition, going through your statements can potentially jog your memory to recall other deductible expenses that you may not have charged to your credit card. Be sure to check with your tax professional to learn which expenses qualify for deductions.
Using Your Credit Card to Pay Your Taxes
Another way that credit cards could potentially help you with your taxes is as a method of payment. The IRS authorizes third party payment processors to collect taxes on its behalf, but these companies do charge a payment processing fee of between 1.87% and 2.25%. Nevertheless, these fees can be worth paying under certain circumstances. For example, a cardholder who is receiving 2% cash back on all purchases could come out slightly ahead when using a payment processor that charges 1.87%. You may also be able to pay your state taxes online, but many states have their own processing systems.
Paying your taxes with your credit card also saves you the time and expense of writing a check and mailing it, while removing the uncertainty inherent in the postal mail system. In addition, those who pay their taxes online with a credit card can receive immediate proof of payment, which can be important when applying for a mortgage and other types of loans.
Furthermore, someone using a credit card that offers interest free promotional financing could extend payment on their tax liability for only the price of the processing fees. These offers feature 0% APR financing on new purchases for a limited time, but the standard interest will apply on any unpaid balance when the introductory financing period expires.
On the other hand, those who would incur interest charges when they use their credit cards to pay for taxes would be better off seeking alternative means of finance. For example, the IRS offers payment plans that have interest rates lower than most credit cards. Again, be sure to speak with your professional tax preparer to see if these options make sense for you.
By understanding how credit cards can assist you with your taxes, you can use these powerful tools for your benefit this April.