What If You Can't Pay Your Taxes?

File your return on time anyway to minimize the penalties.

What if you owe money to the IRS but don't have the cash to pay the bill? Don't panic &emdash; but don't ignore the problem, either. File your 2012 tax return (or an extension — more below) by the April 15, 2013, deadline, even if you can't pay the full amount you owe. You'll pay a late-payment penalty of 0.5% of the unpaid amount per month, up to 25% of the balance. But that's a lot better than the failure-to-file penalty of 5% a month.

To hold down the penalties and interest that will continue to add up until the balance is paid in full, pay as much of your tax bill as you can when you file your return. 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 some or all of the remaining cash.

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Mary Beth Franklin
Former Senior Editor, Kiplinger's Personal Finance