American Express Membership Rewards Points Can Now Pay Down Federal Taxes

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With tax season upon us, American Express has developed a novel way that you can pay Uncle Sam: with Membership Rewards points. According to a company press release, AmEx has partnered with a pair of online tax payment portals: Official Payment Corp., and Pay1040.com. Both companies already offered special deals for American Express cardmembers, allowing them to use Membership Rewards points to cover online tax payment processing fees. The new partnerships take the concept even further. Here’s how it works.

  • Cardmembers earn Membership Rewards points by making everyday purchases with American Express.
  • Pay1040.com and Official Payments Corp. both allow participants to convert 200 rewards points into $1 in IRS payment.
  • Use your American Express card to pay the balance of your tax bill, and you’ll even earn points toward next year’s payment.

The points conversion program takes advantage of IRS rules that allow Americans to make up to two third party tax payments each year. This way, you can still make another credit card payment to the IRS if your points don’t cover the entire bill. It takes about five to seven business days for payments processed by third party companies to post to your IRS account. Therefore, if you intend to convert points into tax payments, give yourself at least a week before the IRS’ April 15 filing deadline.

Not Every AmEx Cardmember Will Get to Pay the IRS with Points

On average, the IRS reports that most individuals get refund checks in the neighborhood of $2,300. However, small business owners who like to earn Membership Rewards points by managing company expenses on their AmEx cards could have the best chance of landing an IRS bill instead of a refund.

Of course, a 200 point to $1 ratio might not be for everyone, even those of us scrambling to find ways to pay off the IRS in a pinch. Many of the luxury rewards offered on the American Express website translate to somewhat more favorable valuations. However, if your tax software surprises you by telling you that you’re in the red for the year, Membership Rewards points could be a great way to keep from tapping into your savings or increasing your credit card balance.

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Comments (scroll down to add your own):

  1. Great informative article on different ways we can pay down our federal taxes. In an effort to better public finance my client Assured Guaranty has offered great solutions to fit my need.

    Comment by todd — Feb 4th 2010 @ 10:03 pm
  2. Sweet! I just got an American Express rewards card at http://pre-authorized.com . I usually file my taxes at TurboTax.com, but I guess I could try Pay1040.com. Im not filing for a couple weeks, so if anyone has tried Pay1040.com and didn;t like it, please let me know.

    Comment by Matt — Feb 8th 2010 @ 7:54 pm

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