Can I deduct the 1.75% credit card fees when paying quarterly estimated taxes for my small business?

This is helpful but I'm a bit confused. Are ALL fees related to paying taxes deductible then? Like if I pay my property taxes with a credit card, would those fees be deductible too? Or is this specifically because it's business estimated taxes?

The deductibility depends on what type of tax you're paying. For business estimated taxes as a sole proprietor, the processing fees are business expenses because they relate directly to your business operations. For personal property taxes, the processing fees would generally be considered personal expenses and aren't deductible as business expenses. However, if the property is used for business, a portion of those fees might be deductible proportional to the business use. Always best to check with your tax professional for your specific situation since tax laws can be quite nuanced.

Does this tool actually connect to your accounts or do you have to manually input everything? I'm always worried about giving access to my financial accounts to new services.

I'm skeptical about these AI tax tools. How accurate is it really? I've had CPAs give me different answers for similar questions, so I'm curious how an AI can be definitive about tax deductions that even professionals debate.

The tool doesn't need direct access to your accounts - you can upload statements or enter information manually. It's actually designed to protect your privacy while still giving personalized advice. As for accuracy, I was skeptical too, but it provides references to specific IRS publications and tax code sections for each recommendation. My CPA actually reviewed the suggestions and was impressed with how thorough and accurate it was. The best part is you can ask follow-up questions about specific deductions, and it explains the reasoning in plain English instead of tax jargon.

Wait, so this isn't free, right? You're paying for someone to wait on hold for you? How much does that cost? Seems like something I could just do myself if I put my phone on speaker and did other work.

I don't believe this works. I've been calling the IRS for WEEKS and can't get through. Most times I get disconnected after waiting for an hour because their "call volume is too high." If this actually works, I'll be shocked. Sounds too good to be true.

You're right, it's not free, but it saved me literally hours of my time. I don't have to share the exact cost, but I can tell you it was absolutely worth it for me as a business owner when I factor in my hourly rate and the stress of being on hold forever. I was skeptical at first too! I'd spent three days trying to get through to the IRS myself, getting disconnected each time after 45+ minutes. The service actually works by using their system to navigate the IRS phone tree and hold in the queue. When an agent is about to pick up, they call you and connect you immediately. No more waiting on hold for hours or getting disconnected.

That's a good point about the math, but aren't there limits on what types of cards you can use? I thought some processors don't accept certain reward cards or limit the rewards on tax payments. Has anyone run into this issue?

You're right to ask about card restrictions. Some payment processors do limit which cards can be used or have specific terms for tax payments. In my experience, many of the major credit card companies have started to classify tax payments differently, sometimes as "government services" which might earn reduced rewards or none at all. I recommend checking your specific card's terms and conditions before counting on those rewards. Some business cards still offer full points/cash back on these transactions, but it varies widely. It's definitely worth a quick call to your card issuer to confirm before making a large tax payment.

I use EFTPS too! It's actually pretty easy once you get set up. The initial registration takes a bit (they mail you a PIN), but after that it's super simple. I schedule all my quarterly payments at the beginning of the year and never think about it again.

I tried EFTPS but had issues with their website constantly. It felt like it was built in 1998 and never updated. Plus I really wanted those travel points from my business card since I have to pay the taxes anyway. To each their own I guess!

Thanks for the tip about separating the tax payment and processing fee records! That's really smart from an audit perspective. I'm curious about your approach of switching between EFTPS and credit card based on cash flow - do you find it confusing to keep track of different payment methods throughout the year? I'm worried I might accidentally miss a payment or get confused about which method I used for which quarter when doing my bookkeeping.

@CosmicCaptain That's a valid concern! I use a simple spreadsheet to track my quarterly payments - just columns for date, quarter, method used (EFTPS vs credit card), amount, and any fees. Takes literally 30 seconds to update each time I make a payment. I also set calendar reminders about a week before each due date that include notes about my current cash flow situation, so I can decide which method to use. The key is being consistent with your record-keeping system rather than trying to remember everything later. One other tip - if you do use both methods, make sure to save confirmation emails/receipts from both EFTPS and your credit card processor in the same folder so everything's in one place come tax time.

That's a really smart approach with the 2% rewards card! I'm just getting started with my small business (custom pottery) and haven't even thought about optimizing the credit card rewards for tax payments. Do you mind sharing what business card you're using that gives 2% on all purchases? I'm currently just using my personal card for everything which is probably not the best setup. Also, when you say "schedule quarterly payments in advance" - does that mean you can set up all four payments at the beginning of the year, or do you schedule them one at a time as each quarter approaches?

@QuantumQuester I can't speak for QuantumQuester, but I'd definitely recommend getting a dedicated business credit card ASAP! It makes bookkeeping so much cleaner when business expenses are completely separate from personal ones. For cards with good rewards on everything, look into the Capital One Spark Cash or Chase Ink Business Cash - both offer solid rates on all purchases. Just make sure to read the fine print about how they categorize tax payments specifically. As for scheduling payments, most processors only let you schedule one payment at a time, usually up to a year in advance. So you could theoretically set up all four quarterly payments in January, but you'd need to do each one individually. Some people prefer this approach for budgeting, while others (like me) prefer to evaluate cash flow closer to each due date.