In this article: Don't miss your new tax credits Consider charging your income tax bill

t was called the Taxpayer Relief Act of 1997, but in fact many of the family-friendly perks it put in place didn't kick in until last year. If you - like most taxpayers - plan to file this month, you'll want to bone up on the rules.

"Even though the IRS tries to make information available on all the changes, it doesn't go and audit your return and tell you what you've missed," says Joseph Falanga, managing director at Goldstein, Golub, Kessler, American Express Tax and Business Services.

Overlooking a credit or deduction you are entitled to can cost you hundreds -- even thousands -- of dollars. Here are some biggies you won't want to miss:

• Child Credit: $400. This year, couples with an adjusted gross income of $110,000 or less ($75,000 or less for singles) can lop off $400 from their tax bill for each child under age 17.

• Hope Credit: $1,500. Families with a household income of $100,000 or less are eligible for a $1,500 credit for each child's first two years of college.

• Lifetime Learning Credit: $1,000. After the Hope Credit taps out (for junior and senior years in school as well as for continuing education), each family is allowed a credit worth 20 percent of the first $5,000 in annual college costs - a maximum $1,000 a year.

• Student Loan Interest Deduction: up to $1,000. Singles with gross annual incomes of as much as $40,000 ($60,000 for couples) can deduct the interest paid on student loans during the first five years interest payments are due. (The deduction rises in $500 increments to a maximum $2,500 in 2001.)

f -- even after taking advantage of the credits and deductions that kick in this year -- you find the tally running in Uncle Sam's favor, don't despair. This year, for the first time, you have a new payment alternative: You can charge your tax bill.

The Internal Revenue Service is running a pilot program enabling consumers to pay their bills on MasterCard, Discover or American Express (and its siblings, such as Optima).

Here's how it works: You have to file electronically using an IRS-authorized e-filer (such as H&R Block), tax-preparation software (TurboTax or TaxCut) or TeleFile. Then, sometime before the deadline, you can call 1-888-2-paytax toll-free to pay your bill. (Or, when you file electronically using TurboTax, you can type your Discover Card number into the program and pay directly.) You can't charge a tax bill larger than your credit limit or the IRS limit of $100,000.

Whether it's a good idea to charge your taxes is another question entirely. The "convenience" fees charged by the credit card companies are fairly hefty. They work on a sliding scale depending on how much you charge, but run about 1.5 to 2.5 percent. On the high end, that comes to $50 on a $2,000 tax bill.

So if you have the cash and are charging simply for convenience, you're better off pre-authorizing a debit from a checking or savings account. If you just don't have the money, understand that unless you pay off your credit card bill the first month, you could end up spending hundreds in interest. Credit card interest is averaging 16 percent; if you take a full year to pay off a $2,000 bill in equal monthly installments, you'll pay over $180 in interest.

As ugly as that sounds, a credit card may be a more palatable alternative than the IRS' schedule of interest, which kicks in if you're late, even if you work out a payment schedule. Call your local IRS office to find out how much interest you'd be looking at (it can go as high as 25 percent of tax due) so you can weigh the numbers.

Jean Chatzky's column appears every other week. Write to: Jean Chatzky, USA WEEKEND, 1000 Wilson Blvd., Arlington, Va. 22229-0012 (e-mail: finance@usaweekend.com).

Illustration Credit: RANDY LYHUS for USA WEEKEND