That’s what some working stiffs call the figuring of their income tax bill. The perception is if you determine you’re receiving a refund, you win. Not so much when paying in tax you owe.

What can you do if you find you do owe taxes this year that you can’t pay in a lump sum?

“Whatever you do, file by the deadline and pay what you can,” says Michaela Harper, Credit Advisors Foundation (CAF) Program Director. “There are things you can do but not filing by the deadline will only complicate the situation and cost you more.”

Vigorously investigate alternative payment options and don’t rely on the first ‘easy answer’ you find - like a loan or credit card. Remember, the IRS does allow you to make payment arrangements with them (you can find IRS Form 9465 – Installment Agreement Request – on their website, www.irs.gov). Interest rates for IRS installment payments are refigured each quarter and are currently set at 7 percent.

Although both the IRS and card issuers have really amped up the volume on paying your tax liability with a charge card, don’t misinterpret this advice. There are differences to consider when using a charge card or credit card to pay your tax obligations. Still, paying with either option will require you to pay a 2.5 percent convenience fee for the tax you owe. For example, if you owe $2500 in taxes, to pay with plastic will add $62.50 right off the top to your balance.

With a charge card, like American Express, the entire balance must be paid each month. Although you may receive ‘bonus points’ when using a charge card to pay taxes bear in mind the entire amount of the balance must be paid when you receive your statement.

However, while you can make payments on the balance you owe with a credit card, it doesn’t end there. There are other significant details to think about that could end up costing you big bucks. Other potentially costly considerations include the interest rate applied to your credit card balance (as Sam Hohman, CAF CEO explained, noting the 2.5 percent convenience fee, “You’d have to have a card that beats 4.5 percent”), being unable to maintain making payments and defaulting on the debt or missing other payments and having the credit card activate the Universal Default clause in your card holder agreement, increasing your interest rate to a default level as high as 30 percent.

One consumer who emailed us with questions about IRS payment options offered this tongue-in-check assessment of the CAF no credit card perspective:
“Wait a minute - you mean, I shouldn’t pay my taxes by credit card and incur interest on top of a debt that I owe the government? Then, by the time I pay off the debt, if I do, it will be the next year when I charge my taxes again? You mean I should ask possibly to have extra money taken out each paycheck towards my taxes (on my W-2/4/9 (whatever number), so it reduces the amount I would have to pay in the next year, if I had to pay in? NO WAY! Live the American way - CHARGE IT! ...or not.”

Of course, a better option may be to include your tax obligation in your Debt Management Program (DMP). Over the years, CAF has helped thousands of people pay down and pay off tax debt owed to the IRS.

So, if you find you do owe money to Uncle Sam, you still need to file by the deadline, and you still need to request an installment agreement but if you take the time to examine your options and choose what is most cost effective for you, you won’t have reason to fear or avoid next year’s April 15th “family reunion”.