Don't panic. There are ways to buy time to scrape up enough cash. By Mary Beth Franklin, Senior Editor April 2, 2009 The April 15th deadline for filing your 2008 tax return is fast approaching. For millions of Americans hit hard by the financial crisis, finding the cash to pay Uncle Sam this year may be a bit tougher than usual. But don't panic. If you can't pay the full amount you owe, you should still file your return on time because the penalty for failing to file your taxes is ten times higher than the penalty for failing to pay them. (If you don't owe any taxes, you can ignore the April 15 deadline, but you'll still want to file a tax return to claim your refund.)If you owe taxes and can't pay the whole bill, pay as much as you can when you file your return. That will reduce the penalties and interest that will continue to accrue until the balance is paid in full. (No penalties and interest accrue if you've paid at least 90% of the total tax bill by the April 15 deadline.) RELATED LINKS What You Need to Know About Paying Your Taxes VIDEO: Pay Your Taxes Kiplinger Tax Center Then wait for the IRS to send you a bill for the balance. That should take about 45 days and give you some time to come up with the cash. If you still can't afford to pay the full balance, pay what you can to buy yourself an additional month or two until another bill arrives. Or, if you act quickly, you can file for an extension by using Form 4868 (electronically or by mail) to delay your tax-filing deadline by six months, until October 15. The extension doesn't delay the deadline for paying your taxes. You'll still incur interest charges and start racking up late-payment penalties of 0.5% a month on the unpaid amount, up to 25% of the balance. Still, that's a lot better than failing to file altogether, which entails an onerous penalty of 5% a month on the unpaid balance, plus interest. Sponsored Content For instance, if you file for an extension and pay your $5,000 tax bill three months later, you'll owe a $75 late-payment penalty plus interest. But if you don't file your return on time -- even if you pay up three months later -- you'll owe a $750 penalty for failing to file. At that rate, it may be cheaper to pay your taxes by credit card, or less painful to ask family or friends for a loan. If you own a home and have access to a home equity line of credit, you could tap it to pay your tax bill. At least you could deduct the interest you pay on next year's taxes. But if you are among the millions of Americans who have had their home equity lines frozen or revoked, it's time to consider Plan B. Advertisement The installment plan If you can't pay your taxes, denial and delay only make a bad situation worse. Ignore it and you could eventually face some nasty collection procedures in which the IRS imposes a levy on your wages or bank accounts, or places a federal tax lien against your property. Contact the IRS at 800-829-1040 to discuss your payment options. The agency may be able to provide some relief, such as a short-term extension of up to six months to pay your bill. Or you may be able to work out a monthly payment plan. The IRS is required to accept what you owe in monthly installments of up to three years if your total tax liability (not counting interest and penalties) is $10,000 or less. In extreme cases, you may be able to file an Offer in Compromise and settle your tax debt for far less than you owe, if you can prove you don't have the means to pay and it is very unlikely that you ever will. In light of the tough economic times, IRS Commissioner Doug Shulman is trying to put a human face on what has typically been one of the most feared and loathed federal agencies. He has given IRS agents the authority to suspend collection actions in cases of financial hardship and to allow folks to miss an installment payment or make a partial payment of back taxes without triggering payment of the total tax due. Bottom line: Communication is the key. If you can't pay up, ask for help.