Will you be short of cash when it comes time to file your 2000 tax return? Your cash crunch may be even more severe if you have to make a quarterly estimated tax payment for 2001 as well, on April 16.
If you’re in the above situation, take whatever money you can find and put it towards your 2001 estimated tax payment. By doing so you’ll restrict your tax problem to one year-2000–rather than two.
You may be able to tap a home equity line of credit to pay your 2000 taxes. The interest rates on such loans generally are reasonable and the interest you pay likely will be tax-deductible.
Another approach is to attach an installment payment request to your 2000 return. On this form, you can propose a schedule for paying the taxes you owe. For amounts up to $10,000, the IRS usually will permit a three-year stretchout (with interest, of course).
Whatever you do, don’t skip filing your 2000 tax return. The penalties for late filing are much more severe than the penalties for late payments. So file on time, tell the IRS how much you owe, and then try to work out the best way to give the tax collector his due.