If you work for yourself, you’re probably all too familiar with the concept of estimated taxes. These are the quarterly payments self-employed individuals have to make throughout the year to the federal government since they don’t have taxes automatically withheld from their pay the way an employee of a company would.
Personally, I always prefer to pay as little as possible throughout the year while paying enough to avoid the underpayment penalties the IRS can charge if you end the year owing too much. However, this year I’m wondering if it might be worth overpaying in order to take advantage of a deal that recently surfaced through Turbotax.
This year, Turbotax is offering a 10% bonus on tax refunds if you take any portion of your refund in $100 increments in the form of Amazon.com gift cards.
If you’re like me, self-employed and unwilling to give the government a free loan by paying more than necessary quarterly, you might typically end the year owing another few hundred bucks to Uncle Sam, rather than receiving a refund like most Americans do. I’d be awfully tempted to make an additional tax payment in excess of the final quarterly estimated taxes I paid on January 15th in order to be eligible for a refund large enough to take advantage of this Amazon bonus.
As an additional benefit, it’s possible to earn miles and points while paying taxes. While you can use a credit card directly, this comes with a fee in excess of 2%, which can add up quickly when paying thousands in income taxes over the course of the year. Instead, I prefer to purchase Vanilla Reload cards at CVS using a points-earning credit card to add to my Bluebird Account and then write the government a check from there.
Doing the Rebate Math
By purchasing Vanilla Reloads in $500 increments, the $3.95 activation charge equates to less than 0.8%, which is a low enough surcharge to come out ahead on points redemptions given our normal expectation of earning at least 2% back in free travel. Adding this 1.2% expected net savings to the 10% Turbotax Amazon refund bonus, that’s like earning 11.2% back on the money you overpay to the government in taxes.
The 10% Amazon bonus with Turbotax is good for up to $10,000 in total, so you could take up to $9,090 in tax refund in the form of Amazon credit to take full advantage of the promotion. While I certainly don’t have a need for that much in Amazon credit, perhaps some of you may and can benefit from the full extent of the promotion.
To any tax experts out there: think I’m missing something here? Let us know in the comments!