Worried about how you’re going to pay your tax bill? You could always use your credit card. 

The IRS will accept payment of your 2008 federal income tax on a Visa, Mastercard, Discover Card or American Express.  Many states are accepting income tax payment via credit card too!

But you might want to rethink this decision based on the fact you will be charged a “convenience fee” of 2.49% of the amount you charge.  That’s because the IRS isn’t interested in paying the merchant fee, so you have to foot that bill.  It may not be a big deal paying an extra fee of  $12.45 on a $500 tax bill, but what about an extra $124.50 on a $5,000 income tax bill?

And don’t forget that unless you pay off that bill within the credit-card issuer’s grace period, you’ll start getting charged interest.

So before you pay your federal income tax using plastic, you may want to dig up the money some other way. Ask your parents, sell some of your old gold or even set up an installment plan with the IRS themselves.  The IRS charges a $52 setup fee (for setting up automated payments from your bank account) and then a monthly interest rate on the outstanding balance. Currently, that interest rate is 0.667% per month (which equates to 8% annually).

If you do have a low interest credit card and can pay off a big chunk of federal income tax right away, a credit card may be a good option for paying for federal income tax using a credit card. If you decide to pay your federal income tax using a credit card, visit pay1040.com to process your payment.

source: Wall Street Journal