Tax procrastinators: File now or pay the price
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Once your payment plan is approved, you'll get a letter from the IRS with specific guidelines and payment information. You will be charged a one-time fee of $105 unless you make arrangements to have your installment payments made via direct debit from your bank account. In automatic payment cases, the fee drops to $52. Some lower-income taxpayers might be able to pay a reduced fee of $43.

But in all cases, your outstanding balance will be subject to IRS interest charges.

Let's make a deal
What if the bill is just too big? Then it may be time to negotiate.

The IRS now works with taxpayers who owe more than they can ever pay. You have two options: an offer in compromise or a partial-payment installment plan.

Through its offer-in-compromise program, the IRS hopes to get some taxpayer money sooner than it would after years of costly collection efforts. In these cases, the agency reduces the amount a taxpayer owes to a bill that the taxpayer says he can actually pay. The key here is that the amount must reasonably reflect your ability to pay. It's not merely haggling to get your tax bill reduced.

In fact, the IRS is stepping up its efforts to weed out taxpayers who use the offer-in-compromise route merely to delay paying their bills. Last year, the IRS began collecting a $150 application fee with each offer-in-compromise request. If your offer is accepted, the $150 counts toward what you owe. If the IRS rejects your proposed payment, you forfeit your fee. The agency hopes this means that it will hear only from folks who truly need the negotiated bill.

An easier route might be a partial-payment installment agreement. Here, a taxpayer makes regular monthly payments to the IRS, but the payments do not completely pay off the tax debt. Once the taxpayer meets the installment agreement's partial payment terms, the rest of the tax debt is forgiven.

To get a partial-payment deal, you'll need to file the same Form 9465. When you submit it, include a letter explaining why the IRS should let you incrementally pay off less than you owe.

Filing comes first
Before you can take advantage of any alternate payment plan, you've got to file.

The sooner the IRS receives your paperwork and payment, the sooner the penalty and interest charges will stop.

Filing also could spare you some additional unwanted IRS contact in the future. Procrastination gives the IRS more audit time. The three-year statute of limitations on examining old returns doesn't begin until a return is filed. The longer you take to file, the more time you give the tax man access to your records.

And because federal law normally requires you to file a return even if you don't owe any taxes, continued delay could open you up to an IRS criminal investigation. In that case, the time you bought yourself by putting off filing could be offset by the expense of hiring a good tax attorney.