If you don’t have enough cash to pay your tax bill, don’t panic; there are many others out there in the same boat. You will not go to jail. To limit penalty and interest charges if you can’t pay the full amount, at least file a return on time and scrounge up as much funds as you can. Penalties are calculated each month you are late. The penalty for not filing at all (up to 25%) is worse than the penalty for not paying after you file (1/2-1%).

A better course is to ask a friend or relative for the money, or if you have any equity in your home, tap into an equity home loan (the interest is tax deductible). Another option for paying -– if you qualify-–is to set up a monthly payment plan with Uncle Sam by filing Form 9465. You would still pay penalties and interest on the amount owed as well as a fee for an installment agreement. In some cases, it would save you money overall to borrow the money and pay back your lender. This also avoids an IRS lien on your property, something the IRS does when you enter into an installment agreement with them.

The IRS offers many ways to pay, including credit card, electronic funds transfer, check, money order, cashier’s check, or cash.

Learn more about federal income taxes and the law at FreeAdvice.com. To find a tax attorney, go to AttorneyPages.com.

To learn more about taxes and the IRS, see the following articles:

The Free Advice Guide for Filing Your 2006 Tax Return
Filing Your 2006 Tax Return: Bring on the Paperwork
How to Get Help Preparing Your Tax Return
When You Have to File Your Tax Return Late
Do I Have to File if I Live Outside the U.S.?
What Will It Cost Me to Get My Money Early?


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