In a perfect world we’re always able to pay all our bills, our kids’ college tuition, our mortgage payment, our car payment—our this payment and our that payment. The list goes on. But what if April 15 rolls around and you find you can’t pay the full amount of taxes you owe?

As explained by the Internal Revenue Service (IRS), if you cannot pay the full amount by the April deadline, you should still file your return on time and pay as much as you can to avoid penalties and interest. There are also alternative payment options to consider, including paying by credit card. However, given your efforts to climb out of debt and limit credit card use, you should approach paying your tax bill by credit card with extreme caution.

The IRS offers additional ideas for finding the means to pay your taxes, including a bank loan; liquidating savings accounts, savings bonds, stocks, and so on; borrowing against a 401(k) or life insurance; using equity in real estate or other assets. Remember that the IRS is more interested in collecting taxes than it is in what payment approach makes the most sense to you. So again, use wise judgment in determining the best payment alternative to meet your tax obligation.

• Extending the Time to Pay: Based on the circumstances, you could qualify for an extension of time to pay. The IRS is willing to allow extensions of time to pay in order to assist in tax debt repayment. A short-term extension of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 1-800-829-1040. Taxpayers qualifying for an extension of time to pay of 30 to 120 days generally will pay less in penalties and interest than if the debt were repaid through an installment agreement.
• Installments through an installment agreement. You can apply for an IRS installment agreement using the IRS Web-based Online Payment Agreement application on IRS.gov. Another alternative is to attach a Form 9465, Installment Agreement Request, to the front of your tax return. The IRS charges a $105 fee for setting up an installment agreement. The fee is only $52 if you pay via direct debit. If your income is below a certain level (see Form 13844), you may qualify for a $43 fee. You will also be required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month, after the due date that the tax is not paid. If you do not file your return by the due date—including extensions—you may have to pay a failure-to-file penalty.

When do Penalties and Interest Apply?
Penalties and interest do not apply in years in which a taxpayer is entitled to a refund. About a third of those who file returns for past years discover they have a refund coming. Penalties and interest apply to years in which money is owed. The interest charged on late payments changes quarterly. During the last several years the interest rate has ranged from a high of 9 percent to a low of 4 percent.

The penalty for filing late is generally 5 percent per month, or part of a month, up to 25 percent of the amount of the tax shown due on the return. The penalty for paying late is 1/2 of 1 percent per month, up to 25 percent of the unpaid amount due.

The IRS recognizes that many people drop out of the system because of personal problems, including serious illness, a death in the family, or loss of financial records in a natural disaster. Depending on the situation, informing the IRS why returns have not been filed could result in a waiver of penalties.