Lauren Tara LaCapra
Those who delay too long in paying their taxes could end up paying more interest and fees to the government than they would have by adding the payment to their credit-card debt.
Despite the incentive to file early this year, the IRS estimates that 10.3 million people will apply for a six-month extension -- slightly more than last year. (Taxpayers can only receive their special stimulus check of at least $600 once a tax return is filed.) In addition, about one-third of those who file returns late find out they are actually entitled to a refund. While penalties and interest do not apply for those years, they do apply for years in which money is owed. The IRS' interest rate changes quarterly, but has ranged from 4% to 9% in recent years. Paying late comes with other penalties as well. If taxes are not paid, and no effort is made to pay them, the IRS will first ask the taxpayer to get a loan or sell or mortgage their assets. The agency can also levy bank accounts, wages or other income, and take ownership of assets. A federal tax lien can have what the IRS calls a "detrimental effect" on credit scores. In addition, when you don't file a return, the IRS essentially files one for you based on the information it has available. That calculation could show you owe more than you really do, since it might exclude deductions and credits that only you and your accountant can hammer out. The IRS offers several scenarios on its Web site of when a consumer might owe less or be entitled to a refund instead of the bill conceived by the IRS.
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