I have not filed my current tax return. I know I won't be able to pay what I owe. What should I do?

File the return as soon as possible!

Some people are afraid to file when they owe tax they cannot pay. Eventually the IRS will catch up with most non-filers. Delaying filing can be quite expensive. Here's what often happens:

When a return is not filed, after a period of time, the IRS will request the return. If the request is ignored, the IRS will charge tax using the information they received from sources such as employers, banks, brokerage firms, retirements plans and the Social Security Administration. That may or may not be the correct tax since it will not take into account the filing status and deductions that the taxpayer is entitled to.

Eventually, a payment plan is unavoidable.

At that point you will have dug yourself a hole that could be very difficult to deal with. That"s because the IRS will not allow you to dig that hole deeper. That means you will have file returns on time and pay any taxes due. At the same time you will be making payments on the back taxes

To add to that pain, you will owe penalties and interest that can add about 50% to the unpaid taxes.

Penalty for filing late. It's 5% of the tax due for each month the return is late. The maximum is 5 months, but you can do the math on 25% of the tax due!

Penalty for paying late. It's 1/2 of 1 percent per month for up to 45 months. That's amounts to nearly another 25 %. 

InterestCurrently 5% per annum computed daily.

Note: You won't be able to avoid the late payment penalty and interest until you make payments. 

State Taxes. All of the above will be compounded by state tax laws and procedures.