Taxes and paying them

The tax deadline is nearing and you don't have enough cash to pay up.

It would be easy to pull out your credit card - heck even the IRS promotes using plastic as "convenient" and "safe and secure."

But that doesn't mean it's a smart move.

In fact, using credit cards to pay your taxes is often the wrong way to go.

The reason: Credit card payments to the IRS are processed by third-party companies. These service providers charge fees randing from 1.9% to 2.35% or your tax bill, saddling you with additional costs that you may not have known about.

"That outweighs almost every reason to use a credit card," said Bill Hardekopf, CEO of LowCards.com.

If your tax bill is relativey small, paying a nominal fee won't mater much. But the cost could add up. If you owe $6,000 in taxes and have a fee of 2.35%, it will add $141 to your bill.

"And unless you pay off that bill within your credit card issuer's grace period, you'll start getting charged interest at usually around 12% or probably more annually," said Vincent Cervone, a certified public accountant with VRC & Associates in lower Manhattan.

"Find a better way to dig up the money to pay your tax bill."

While charging taxes on your credit card might boost your rewards, those perks are unlikely to be big enough to justify the costs.

"The average reward is 1% of purchase, or 1 cent per dollar spent," Hardekopf said.

"This is much less than the 2.35% processing fee."

Using plastic to pay taxes could also hurt your credit score, noted John Ulzheimer, president of consumer education at SmartCredit.com.

"The downside is if the new debt causes your credit card balance to become too close to the credit limit," he said. "In that case your credit scores will likely go down. Credit scoring systems can't tell the difference between credit card debt caused by a tax payment versus debt caused by a flat panel television or furniture."

Avoiding tax payments on credit cards is an especially good idea for impulsive spenders who would be better off writing a check.

"If the funds aren't available, they won't be spent," said Pamela Diamond, a CPA with Creative Wealth Builders in West Hempstead, L.I.

If you don't have enough money at tax time, look into alternatives to credit cards.

Paying with a debit card will probably cost you far less: a flat fee of around $4. The card must be a Visa Debit Card, or NYCE, Pulse or Star Debit Card.

You should also see if you qualify for an IRS installment payment plan. "If so, this may be the cheapest way to go," Cervone said.