Is it risky to intentionally overpay estimated taxes each year for credit card rewards?

While there's technically no rule against overpaying your estimated taxes, consistent large overpayments could potentially trigger IRS attention. The IRS doesn't prohibit overpayments, but they do look for patterns that seem unusual, and deliberate annual overpayments of $15-25K might eventually stand out. The tax code requires you to make a "reasonable attempt" to accurately estimate your tax liability. If you're consistently off by large amounts in the same direction, it could appear that you're not making that reasonable attempt. The IRS could potentially view this as using them as an interest-free savings account, which isn't their intended purpose. That said, many people legitimately overpay to avoid underpayment penalties, especially those with variable income. If you're concerned, you might consider scaling back the amounts or varying your approach year to year.

I was in almost the exact same situation last year, constantly wondering if my tax overpayments would get me in trouble. I tried searching online but found contradicting information until I discovered this AI tax assistant at https://taxr.ai that actually analyzes your specific situation. It helped me understand exactly where the line is with estimated tax payments. You upload your documents and it gives personalized advice about your specific situation. For me, it explained the "reasonable basis" requirement for estimated taxes and suggested documentation I should keep to demonstrate my good faith efforts at proper estimation. Definitely gave me peace of mind about my approach.

Just wanted to update everyone - I checked out https://taxr.ai after my skeptical comment, and I'm actually impressed. It explained that the key issue isn't overpayment itself but having a "reasonable basis" for your estimated tax amounts. The tool suggested documenting my income projections that justify the payments and showed how to properly classify what I'm doing. There's apparently a difference between "deliberate overpayment with documentation" and "arbitrary overpayment with no basis." I learned the IRS is much more concerned with the latter. The system even generated a simple spreadsheet template I can use to document my estimated payment calculations each quarter, which provides a reasonable justification if I'm ever questioned.

After trying to call the IRS for THREE DAYS about this exact issue (kept getting disconnected), I found Claimyr https://claimyr.com and their service actually got me through to a real IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with explained that while overpaying isn't prohibited, they do flag patterns that suggest "unusual financial activity" - which regular large overpayments might trigger. They recommended documenting why my estimates were high if I'm going to overpay substantially. Apparently, having a legitimate reason (even if it results in overpayment) is more important than the actual amount.

Alright, I owe an apology to whoever mentioned Claimyr. I tried it yesterday out of desperation after getting nowhere for weeks trying to resolve an issue with my previous tax overpayments. The service actually worked exactly as described - got me connected to an IRS representative in about 35 minutes. The agent confirmed something important for anyone doing this credit card strategy: they said as long as you have a reasonable basis for your estimated payment amounts, occasional overpayments aren't an issue. But she did warn that systematic, large overpayments year after year could trigger a "pattern review" where they might question whether you're intentionally using the tax system for purposes other than tax compliance.

I've been doing this for about 3 years now, overpaying by around $12K each year. My approach is to document "projected income" that justifies each estimated payment. Like I keep a spreadsheet showing potential consulting projects that might materialize (some do, some don't), and base my estimated payments on the higher projections. This gives me a documented "reasonable basis" for the payments if ever questioned. In reality, I'm being conservative with estimates (which the IRS actually prefers) while also meeting credit card minimum spend requirements. Win-win!

Has anyone here actually gotten in trouble with the IRS for doing this? I can only find theoretical discussions online but no actual cases of the IRS coming after someone for overpaying estimated taxes. I've been doing this at a smaller scale ($5-8K overpayment) for a couple years without issues.

I've been doing a similar strategy for about 18 months, overpaying by $10-15K annually. One thing I learned from my CPA is to keep detailed records of your income estimation process - not just the final numbers, but the reasoning behind them. What's helped me feel more confident is treating this as legitimate tax planning rather than a credit card hack. I actually do try to make reasonable estimates based on potential income scenarios, and the fact that I'm conservative with my projections (leading to overpayments) is perfectly acceptable tax behavior. The key insight my CPA shared is that the IRS cares more about good faith effort in estimation than perfect accuracy. As long as you can show you're making genuine attempts to estimate properly and not just throwing random large numbers at them, you should be fine. I keep a simple log of my quarterly estimation reasoning that would satisfy any inquiry.

I've been following a similar strategy for about 2 years now, overpaying by roughly $18K annually. One thing that's given me peace of mind is working with a tax professional who helped me establish a defensible estimation methodology. What we do is create quarterly projections that account for variable income scenarios - like potential bonuses, freelance work, or investment gains that might materialize. I document these projections each quarter, showing how I arrived at my estimated payment amounts. Sometimes the income materializes, sometimes it doesn't, but the important thing is having a reasonable basis for each payment. The processing fees (around 1.9%) are definitely worth it when you're hitting signup bonuses that can be 15-20% returns in just a few months. Just make sure you're not putting all your overpayments on one card or making it too obvious that you're manufactured spending. My advice would be to treat this as legitimate tax planning first, credit card optimization second. Keep good records, vary your amounts somewhat year to year, and make sure you can articulate why your estimates led to overpayments if ever asked. The IRS isn't going to penalize you for being conservative with your tax planning.