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Transcript: Pay taxes with credit card

This tax season, the IRS said it will be more compassionate toward taxpayers hit hard by the tough economy. But if you have the wherewithal to pay but can't scrape together the cash, you do have a several payment options.

Regardless of your situation, you need to go ahead and file your return on time. Otherwise, you will be paying a penalty of 5 percent per month on your total balance, up to a 25 percent maximum. If you do file but don't immediately pay the IRS, the penalty is only 0.5 percent of the amount you owe.

One option is to pay your tax bill with plastic. For debit card payments, the companies contracted to accept your payments generally charge a flat fee of $3.95. But for credit card payments, you'll be charged 2.49 percent of your tax bill or a minimum of $1. And don't forget about the interest rate on your credit card. If you can't pay in full when the bill comes due, then you'll start racking up interest charges on your account.

Before deciding on a payment method, calculate how much interest you will have to pay to your credit card company or the IRS -- and try not to pay any more interest than necessary.

For more ways to pay your IRS bill, visit the Bankrate.com Tax Guide.

Bankrate.com's corrections policy
-- Posted: March 23, 2009
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