By Kevin Hagen, Contributing writer

If you can't pay your taxes, you should file your return anyway to avoid a late filing penalty.

If after preparing your tax return you find that you owe taxes and don't have the money to pay, you have some options. Taking action now can save you money in penalties and interest.

File Your Return
When you can't pay your taxes, you should file your return anyway. If you don't, you will be charged a late filing penalty in addition to late payment penalties and interest.

According to the IRS, the monthly late filing penalty is 5 percent of the balance of tax owed. By filing your return, you can at least avoid that penalty.

Requesting an extension of time to file your return does not give you more time to pay. You must pay the estimated tax you will owe when you request an extension to file.

Otherwise, interest and penalties accrue from the original deadline for filing your return.

Pay What You Can
An option suggested by The Motley Fool Web site is to pay as much as you can when you file your return and let the IRS bill you for the rest.

The bill will probably come in about 45 days. Pay as much as you can again, and wait for the next bill.

You can buy yourself some time and keep the IRS from taking other actions. But you will continue to incur penalties and interest on the unpaid balance.

Borrow the MoneyThe Web site 360 Degrees of Financial Literacy advises borrowing from friends or relatives, taking out a home equity loan or an unsecured bank loan.

You can also pay with your credit card. However, depending on the interest rate, it may be better to ask the IRS for an installment agreement.

Request an Installment Agreement
If you meet certain conditions and owe less than $25,000 in taxes, you can ask the IRS for a 120-day extension of time to pay.

Another option is to request a monthly payment plan for up to five years. You can use the Online Payment Agreement (OPA) Application on the IRS Web site to self-qualify.

You can also apply for an installment agreement by filing IRS Form 9465, which you can download from the IRS Web site.

If approved, you can have up to 60 months to pay the balance. There is a fee for requesting an installment agreement, and late payment penalties and interest accrue on the balance.

The late payment penalty is 0.5 percent of the tax owed for each month that the tax remains unpaid, up to 25 percent of the balance owed.

The interest rate charged by the IRS is adjusted quarterly and is 6 percent as of Oct. 1, 2008. Interest accrues on the unpaid balance of tax owed, plus the penalties and interest that have been charged.

Even the IRS admits that it may be to your advantage to borrow the money instead. But the installment agreement can be a good alternative when you don't have other options.