There are sentences in the English language that can chill us to our very marrow, such as:
-- "This is your captain speaking. Please assume the crash position."
-- "Next on HBO: 'Girls.'"
As horrifying as those all are, nothing tops the soul-crushing terror of seeing your tax software pop up this message on your computer screen: "Tax Due: $ (waaaaay more than whatever's currently sitting in your pathetic excuse for a checking account)."
This can prompt the kind of wild panic that leads an otherwise sane individual to consider the unthinkable: fleeing to Latvia, pawning the children or, in a pathetically futile act of self-destruction, watching "Girls."
Skip the blood bank
Before you start selling blood or break into the kids' piggy banks, first try applying for the IRS' short-term 120-day payment extension OR an installment payment plan. At their current late-payment interest rates of approximately 3 percent, the cost of most IRS payment plans is extremely reasonable (unlike anything else associated with our tax system).
Once you've filed, you can apply online for an installment plan if you owe $50,000 or less (including penalties and interest), can pay at least $25 a month and can pay the entire tax debt off in 72 months or less. To apply for a plan, either fill out an online application, if you qualify, at http://www.irs.gov/Individuals/Online-Payment-Agreement-Application, mail in Form 9465 (and also Form 433-F if you owe more than $50,000) or call the phone number on your tax bill or notice.
So, let's say you owe the IRS $5,000; a cash advance from a low-rate credit card would charge about 12.99 percent interest. Over 24 months, the bill would cost you $6,017, plus credit card fees. If you have bad credit and use a 22.9 percent card, you'd pay $6,591, plus fees. With an IRS installment payment plan, your total bill would be $5,470 over 24 months, including the 0.5 percent "failure to pay" penalty on the unpaid tax balance each month. You'd also pay a fee for setting up your payment plan: $52 for direct debit installment agreements; $105 for online payment agreements or payroll deductions; $43 for qualifying lower-income individuals.
Keep your cash stash
This way, you keep your savings in the bank in case of an emergency, you protect your ability to borrow with your cards if need be, and you keep your credit score intact by not taking out a big chunk of your available credit.
It's certainly not any fun owing a big tax bill, but it's also not the end of the world. You have a good inexpensive option with the IRS, so don't ruin your finances or do something rash and stupid. After all, you'd probably hate moving to Latvia. I even hear they're getting "Girls" next year.
(Brian J. O'Connor is an award-winning columnist for The Detroit News. Contact him at email@example.com.)