Jan. 23, 2006--Charging federal employment taxes on your MasterCard and paying it off later: Priceless.

For the first time this tax season, business owners who paid $1,500 or more in wages in any quarter of the previous year will be able to make federal business-tax payments on their American Express, Discover, MasterCard, or Visa, the Internal Revenue Service announced on Jan. 5.

In addition to the option of authorizing electronic fund withdrawals, businesses can now pay taxes owed on employment tax returns -- Forms 940 and 941. Individual taxpayers can already make credit-card payments for tax owed as far back as 1996.

Credit-card payments can cover the balance due on current returns, as well as up to three previous quarters -- though federal tax deposits will still have to be paid by check, the IRS said.

The move is part of a growing trend toward electronic tax payments since 1999, the year the IRS first began offering online services.

Of the more than 2.6 million of all taxpayers who used so-called e-payment options in 2005, about 1.5 million paid by credit card, a 54% increase from 2004, according to IRS figures.

"The three benefits most cited by our clients are convenience, rewards, and cash management," said Matt Brusch, a spokesperson for Reston, Va.-based Official Payments, one of two transaction firms authorized by the IRS to process online tax payments.

Brusch said that on top of collecting air miles and other bonus points on their cards, small-business owners could cover employment taxes with a credit card payment, then -- depending on cash flow -- could hold-off on paying the balance on the cards until later in the month.

While the IRS itself doesn't charge for online credit-card payments, both Official Payments and a second firm, Link2Gov, charge convenience fees for credit-card payments varying in size based on the amount of the return.

Official Payments, for instance, charges 2.49% of the return, which covers the cost of the services, Brusch said, adding that under new rules, the extra fees can subsequently be written off as a business expense.

On Jan. 3, the IRS also introduced Form 944 under the Employer's Annual Federal Tax Return, allowing small-business owners expecting to owe less than $1,000 to file just once a year -- instead of the quarterly Form 941.