(MoneyWatch) Most folks who scramble to file their tax returns over the next two weeks will owe additional tax. Some people won't have the cash on hand to pay what they owe by the April 17th deadline.
If you're short of money and need more time to pay what you owe, the IRS offers these Credit Card Payment Option.. But if you don't have the cash on hand right now, but you do expect to have it in a few weeks, then you might consider paying your taxes using the
Paying taxes by credit or debit card is available through providers such as Official Payments Corporation, WorldPay US and Link2Gov. You can charge your taxes on your Visa, MasterCard, Discover, or American Express card. The benefits are that this is safe, secure, and convenient. You can also earn rewards offered by your card for things like airline travel or cash-back benefits.
Of course, paying your taxes with a credit card is no free lunch -- it comes with hefty fees. Since the IRS doesn't receive or charge any fees for card payments and the agency cannot pay or reimburse any convenience fee to taxpayers, then fees are charged by the service providers. These can range from 1.9 percent to 3.9 percent.
If the amount of taxes you owe is $3,000 and you pay by credit card, the convenience fee for charging your federal taxes could be about $70. Charge $10,000 and the fee would be about $235. Charge $40,000 (the amount that qualifies for a free airline ticket on some airlines) and the fee is about $940. This fee would typically be more than the cost of buying that ticket outright, so the rewards are typically not worth the fees.
One advantage is that the fee is a deductible business and individual expense. For an individual expense, taxpayers may deduct the fee as a miscellaneous itemized deduction subject to the 2 percent limit on Schedule A.
But if you don't pay your credit card balance in full, you could end up paying hundreds of dollars in interest at a rate that is higher than the IRS interest rate for installment payments.
The bottom line: making a partial payment on your taxes and filing an Installment Agreement Request is a better option than using a credit card, or not filing and subsequently incurring IRS penalties for late filing and late payments.