Delusional thinking among procrastinators

• Delusion No. 1: If I put off filing until the last minute, I'll have less chance of getting flagged for an audit amid the flood of deadline filers. "I don't think so," says Adams. "I've never heard that on either this side of the desk or the other." • Delusion No. 2: Since I didn't make all of my estimated quarterly payments, I just won't file this year and can start fresh next year. "A lot of people miss an estimated tax payment in the course of a year," says Fishman. "That's not that big a deal; you just have to pay interest and a penalty, which works out to be about what you would pay on borrowing money." • Delusion No. 3: I don't need to go to all the trouble of filing because I didn't make enough money to make it worth the IRS's trouble to come after me. "As a matter of fact, IRS statistics show that people who make less money are audited more frequently than people who make more money. The reason for that? Abuses of the earned income tax credit are unbelievable," says Adams.

Getting back on track
So you've slipped, maybe several times. You're late or you didn't file at all. Don't panic. While the IRS can be sticklers in many respects, they are quite flexible when it comes to working out payment plans. You may even be able to reduce your overall tax bill through an offer in compromise.

The first step may be the hardest: Get to the root of why you procrastinated in the first place. Perhaps you have bad family associations with taxes, a divorce suddenly placed your taxes in your hands and you don't want to think about it, or you are a successful professional who is too embarrassed to admit that taxes baffle you.
 
"You can't suggest to a client to do an offer in compromise if he or she still has fear about taxes, because part of the deal is, they can't get behind again," says Hayden. "If you haven't dealt with why you procrastinated in the first place, you're going to keep doing it. They have to be in a routine in taxes before an offer in compromise can even work, because otherwise they'll just blow it."

The second step is to admit that you've been remiss. Best bet: Come clean to an accountant who can help you explore your options before you contact the IRS.

"If you're behind, just get current today," says Hayden. "That's the IRS philosophy. That requires a structure change, because if somebody can't pay their taxes today, they're always going to be in debt to the IRS."

The third step is to resolve to live on your net income, not your gross. That way, you'll avoid the tax trap for good.

"Self-employed people think they can put off taxes because they don't have the cash flow and they spend their gross instead of their net," says Hayden. "To catch up is just too hard, and then it becomes absolute fear; they don't know how to deal with it so they keep putting it off. You cannot spend your gross -- it's not a real number."

Jay MacDonald is a contributing editor based in Texas.