Tax Tip No. 7: Can't Pay?


You hit the total button on your tax calculator and find you owe Uncle Sam a lot more than you can possibly scrape together between now and April 16th.

What can you do when you end up owing the IRS, but can’t pay?

• File anyway and pay as much as you can. The IRS will send you a bill for the balance due. It's the best way to buy time and avoid interest and penalties.

• Whatever you do, don't try and escape payment by applying for an extension to file. The IRS has special ways to punish this type of dodge.

• You can also ask to go on the installment plan by filling out IRS form number 9465. You may still be charged interest and a late payment penalty for any taxes not paid by April 16th. But the consequences are much less severe then if you make no effort to pay at all.

• Finally, and as a last resort, you could charge your tax payment on your credit card. But, in addition to the interest on your card, you'll pay a 2.5 percent user fee for the privilege.

By the way, Uncle Sam accepts American Express, MasterCard and Discover. But not VISA.