Expensive tax traps to avoid

NEW YORK (CNNMoney.com) -- Tax time can be confusing and tedious. But with only two weeks to go until Tax Day, you should be extra cautious to avoid these tax blunders that can cost you.

A lot of credit card companies want you to pay your taxes by credit card, but, it's almost never worth it. You'll be charged a convenience fee of 2.49 percent of your payment, plus interest. Even if you're tempted with those offers of frequent flyer miles, it's still not worth it, says Joe Ridout of Consumer Action.

We've been saying this for a while, but it bears repeating. Stay away from refund-anticipation loans. These are short-term loans from tax preparers that are based off someone's pending tax refund. The interest rates on these short term loans can be in the triple digits. And this is all for the privilege of getting money a few days earlier.

Recently, Congress has taken steps to crack down on these "predatory" tax-refund-anticipation loans. To get your refund more quickly, you still have options - file electronically or have your refund direct deposited to your bank account.

Probably the worst mistake you could make is not to pay your taxes. Your unpaid balance is subject to a 5 percent per month "failure-to-file" penalty. Plus you'll have to pay interest that is compounded daily. Not to mention the IRS could put a tax lien on your home and other property.

To avoid this, work out an installment agreement with the IRS. This lets you make a series of payments over time. To request an installment agreement, submit Form 9465 or craft your own written request for a payment plan. You should indicate how much you can pay and on what day of the month you can make your payment. You should hear back from the IRS within 30 days. You may have to pay a one-time fee that will range anywhere between $43 and $105.

Don't be fooled. If you file an extension with the IRS until October, you still have to pay the IRS by April 17th. Even if you delay your filing, you have to have estimate how much you'll owe in taxes. And since you're estimating what you owe anyway, it's probably worth your while just to do your taxes.

Big tax refund - save it or pay down debt?

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