Taxes » Tax Filing » Big Tax Bill? IRS Offers Payment Options
If this year's tax filing deadline will be a "pay" day for you and you don't have the cash, the Internal Revenue Service gives you several payment options.
First, even if you can't pay your tax bill, go ahead and file your return on time. This way, you'll avoid the IRS' failure-to-file penalty of 5 percent per month (up to a maximum of 25 percent) of your balance due. You'll still face that penalty each month your bill is outstanding, but it's only 0.5 percent of the amount you owe.
Paying with plastic
Now take a look at what you owe.
Some taxpayers find the easiest way to pay, either part of what they owe or their full tax bill, is with a credit card. The IRS has awarded contracts to three companies to accept payments by plastic: Official Payments, Link2Gov and WorldPay. They take American Express, Discover, MasterCard, Visa or debit cards.
Remember, while this may get you off the hook with Uncle Sam, it will cost you in other ways. Each company has its own fee schedule, with credit card fees ranging from 1.89 percent to 2.35 percent of your tax bill and debit card fees of nearly $4 per transaction.
If you pay a fee, make a note of it for next year's filing. The IRS has ruled that this amount is deductible as a miscellaneous itemized expense.
Keep in mind that if you don't pay off your credit card in full, you'll start racking up interest charges on your account. In some cases, though, your credit card interest charges might fall below IRS penalties and interest you'd owe if you don't pay on time.
So before you decide to pay with plastic, run the numbers so you don't pay anyone -- neither Uncle Sam nor your credit card company -- more than necessary.