Tax nightmare: What if you can't pay the IRS? --- (Reuters) - There are many tax-time nightmares, but here's one of the most common: You don't have the cash to pay what you owe on April 15. -- "A couple of weeks ago, I ended up talking a young woman off a ledge, as it were, because she discovered she had screwed up on her withholding and owed a bunch of tax," says Melody Thornton, a certified public accountant in Cardiff, California. -- If you find yourself in that situation, don't ignore the problem. The worst thing you can do is put off filing your return, without at least requesting an extension, because you're afraid of the bill. The penalties for not filing a tax return are far harsher than those for not paying what you owe. -- How bad could it get? The penalty for not filing a tax return normally runs 5 percent per month that your return is late, up to a maximum of 25 percent. That means if you owe $2,000, and don't pay it until the fall, you could owe a $500 penalty. -- The penalty for not paying is just a fraction of that, at 0.5 percent a month of the unpaid tax at April 15. -- Either way you'll also owe interest, though the current rate is a modest 3.0 percent a year. --- FILE AN EXTENSION -- The simplest thing to do is to file for a six-month extension, using Form 4868, to get some breathing room. If you can, send in a partial payment to reduce the penalties and interest due. -- "The most important thing is making sure that you have a valid extension," Thornton says. "If you file an extension and say, 'I owe nothing,' and then you do owe, that extension is not a valid extension." --- HOW TO PAY -- You'll need to decide whether to pay the Internal Revenue Service first - the standard advice - or to swallow the penalties and interest. -- What's ideal for you depends on what your options are for coming up with the funds. If you can scrimp a little to find the cash, borrow from friends or family, or have access to cheap credit (through a home-equity loan, for example), your best option is to pay the tax bill first. - More, Amy Feldman, at: http://www.reuters.com/article/2014/04/10/us-column-feldman-taxes-idUSBREA3916P20140410