The tax man cometh

A month remains before taxes are due. Chances are that if you haven’t filed by now, it’s because you’re going to owe money. If you think you’re short on the cash to pay your tax bill, you might want to consider this: The penalties and interest you incur can be significant and could end up being more than the amount you owed in the first place.

Use your own figures to calculate what your penalty and interest (currently 8 percent) could be:

“ If you file late, the penalty can be up to 25 percent of the amount due, at a rate of 5 percent per month.

“ If you pay late, the penalty can be up to 25 percent of the amount due, at a rate of 0.5 percent per month.

“ If you file a fraudulent return, the penalty can be up to 75 percent.

If you make a math error and owe more than you calculate, there’s a penalty for that, too.

Here are some other things to consider:

No matter what your situation, do not fail to file. The penalty for that can be up to 25 percent of the amount due. Add to that the interest on the money you owe and the penalty for failure to pay, and the amount can be significant.

If you file an extension, you still need to include 90 percent of the amount that you calculate is due, and the interest keeps accumulating on the unpaid balance.

If the situation isn’t resolved (i.e., the IRS paid off), your property can be seized and your wages garnisheed.

If something goes wrong and you get a letter from the IRS, don’t let fear paralyze you into inaction. OPEN THE LETTER and read it immediately. The meter is running on any penalties and interest you might owe.

If you don’t have money to pay your taxes, gather the funds from any place you can. Nearly any source of money will cost you less than the penalties and interest the IRS will impose.

Consider taking a low-interest credit-card advance or home-equity loan, or cashing in some CDs. Yes, you’ll pay a penalty for early withdrawal, but do the math and compare that to an IRS penalty.