When you can’t pay your taxes

Have you filed your 2007 tax return yet? If so, you probably have a refund coming. Many wait until the last minute, however, if money is owed.

If you’ve done the math and realize that you don’t have all the money you’re going to owe, there’s still time. Your best bet is to get the money anywhere you can, as quick as you can.

Places to look for money:

•Credit cards — Interest rates are likely to be less than the amount you’d owe the Internal Revenue Service, once they tack on interest and penalties.

•Sell something.

•Equity in your house.

•Borrow from relatives.

If April comes around and you still don’t have all the money you owe, send in what you have with your tax return. Don’t fail to file, no matter what, because the penalty is high.

You’ll soon receive a bill from the IRS (with penalties and interest added on) for the balance you still owe. If you absolutely don’t have it and know you can’t get it in one lump sum, consider filing an Installment Agreement Request (Form 9465). This is an agreement between you and the IRS that you’ll make regular monthly payments of a set amount until the debt is paid.

There are some caveats here. By entering into an installment agreement, you promise you won’t be late on next year’s taxes. The fine print says that you’ll make your estimated taxes on time, too.

How much can you pay? The IRS wants you to pay off the debt in 36 months. Line 11 of Form 9465 asks you to put in an amount that you can pay every month. The risk here is that you won’t be able to if something comes up. If you default on the agreement, the IRS can file a lien or levy on your bank accounts. If you leave line 11 blank, the fine print at the bottom of the instruction page says that an amount will be calculated, spreading the debt out over 60 months. Remember, though, that the interest and penalties also will be accruing that long, and the interest rate can change quarterly.

To take a look at the Installment Agreement Request form and instructions, go to the IRS Web site at www.irs.gov and do a search for Form 9465.