Avoid Mistakes in Last-Minute Tax Prep

Meet Uncle Sam, the Bill Collector

If you don't have the cash to pay your tax bill, don't panic. Send your return or extension in anyway and pay as much as you can. Remember, there's a 5%-per-month penalty for filing your return late, but only a 0.5%-per-month penalty for not paying the bill on time.

Then consider your options.

You could charge it. The IRS has relationships with two companies that will let you pay your bill with your credit card. Official Payments Corp. and Link2Gov Corp. will let you charge it using your American Express, MasterCard, Visa or Discover Card. The companies charge a small processing fee (no IRS fee, however) but at least you'll rack up your airline miles. Just make sure the miles outweigh the fees and corresponding interest your credit card will charge if you don't pay your bill on time.

You could go on the IRS payment plan. If you don't want to charge your bill, the IRS will let you go on a payment plan.

Uncle Sam will pretty much let you decide on your monthly payment amount, so think it through because once you pick a number, it must be maintained over the life of the agreement.

Then you can opt to have your payment debited from your bank account, deducted from your paycheck, or you can just make out a check each month. The first two options at least ensure that you're not going to default on your payments.

You must fill out Form 9465 - Installment Agreement Request or create your own written request. Be sure to specify the amount you can pay and the day you wish to make your payment each month. Whichever you choose, attach it to the front of your tax return.

The IRS will respond to your request, usually within 30 days, to inform you whether your request is approved, denied or if additional information is needed. And if approved, you'll be hit with a one-time user fee of $43 that will be deducted from the first payment.