Most taxpayers probably think asking the IRS for a loan is about as smart as going to a neighborhood loan shark. But think again.

If you, or your kids, find yourself in the unenviable position of being unable to pay what you owe with your 2007 return, going on the government's installment plan might be the most economical solution.

First, if you don't have the cash to cover your bill, don't even think that simply not filing is a solution. There are tough penalties for failing to file.

Of course, you could charge what you owe to a credit card. But that can be expensive. Let's say you owe $10,000. One of the firm's that handles credit card payments for the government would charge you a $250 "convenience fee" to do the deal. Plus, if your card charges 19% interest, and you pay off that $10,000 over two years, you'll also pay about $2,100 in interest. The cost of paying with plastic: $2,350.

Now, consider setting up an installment plan with the IRS. You do that by filing form 9465. And you get to propose how much you can afford to pay each month. If you owe less than $10,000 and can pay it off in fewer than three years, approval of your plan is almost automatic.

The IRS now charges $105 to set things up, or $52 if you arrange for automatic debit from your bank account. You'll pay interest and penalties, too. The IRS interest rate is now 6% as of April 1, 2008 and a 0.25%-a-month penalty means you'll basically be paying 9% on the debt, assuming you file on time.

If you pay off a $10,000 tax debt over two years under the installment plan, the interest and penalties plus the set-up cost will total about $1,0 -- a big savings over the credit card route.

If an installment plan is for you, file Form 9465 with your return. Within 30 days or so, you'll hear from the IRS on how to proceed.

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