updated 4/15/2009 4:10:30 PM ET 2009-04-15T20:10:30

Correction: In a story April 14, The Associated Press reported that taxpayers who file for an extension on their tax returns will be allowed to make 2008 IRA contributions as late as Oct. 15, 2009, well beyond the usual deadline of April 15, 2009. The story should have explained that only certain self-employed taxpayers can make 2008 IRA contributions after April 15 by getting a tax filing extension. Most taxpayers would still have to make those contributions by April 15, regardless of whether they filed for extensions on their taxes.

It’s here, April 15, the deadline for filing income tax returns, and the IRS has some reassuring words for procrastinators, especially those who can’t pay what they owe: Don’t panic.

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The agency also has some advice: File a return anyway, or at least file for an extension.

“The worst thing you can ever do with the IRS is ignore them,” said Jackie Perlman, an analyst with the Tax Institute at H&R Block. “They don’t like to be ignored.”

The Internal Revenue Service expects to receive more than 20 million tax returns this week. The agency had received about 102 million as of the end of last week.

With job losses mounting and the economy in shambles, the IRS has promised to be kinder and gentler to those who are struggling to pay their tax bills. The agency is offering to waive late penalties, negotiate new payment plans and postpone asset seizures for delinquent taxpayers who make a good-faith effort to settle their federal tax debts.

But agents will continue to impose big penalties on those who simply neglect to file an income tax return.

“We also have to be tough on those who flout the law and won’t pay what they owe,” said IRS Commissioner Doug Shulman. “The American people who play by the rules every day expect us to go after those taxpayers who don’t pay their taxes.”

Here are some questions and answers for last-minute filers.

Q: What if I don’t file a tax return by the April 15 deadline?

A: Taxpayers who don’t file returns or extensions by midnight on April 15 face penalties of 5 percent a month on any unpaid taxes, up to a maximum of 25 percent.

For taxpayers with small outstanding tax bills, there is a minimum penalty of $135, or 100 percent of the unpaid taxes, whichever is smaller. For example, if you owe $100 and don’t file a tax return, the penalty is $100. Plus, you still have to pay the taxes.

And that’s not all: You’ll also owe interest on the unpaid amount. The government is currently charging a 3 percent annual interest rate, compounded daily.

If you file a return but cannot pay all you owe, the penalty is just 0.5 percent of the unpaid taxes a month. That’s a tenth of the penalty for not filing. Though you’ll still have to pay that interest, of course.

Q: What if I can’t afford to pay my tax bill?

A: Pay what you can and consider asking the IRS for a short-term extension or an installment agreement for the balance. Generally, taxpayers are eligible for installment agreements if their bill is less than $25,000 and they have paid their taxes on time in the past.

Taxpayers with installment agreements must still pay penalties on the unpaid balance, but they are reduced to 0.25 percent a month. Taxpayers can request an installment agreement using Form 9465. They can also request an agreement online at www.irs.gov.

Taxpayers can also use credit cards to pay their tax bills, but they should be careful because some credit cards have high interest rates and fees.

As the IRS says on its Web site, under the “If You Can’t Pay” heading: “Don’t panic. You have options.”

Q: If I file for an extension, do I still have to pay any taxes owed by April 15?

A: Yes. Even if you file for an automatic six-month extension to file your tax return, you must still pay any taxes owed by April 15 to avoid penalties and interest.

The IRS estimates that 10 million taxpayers will file for extensions this year, up from 9.5 million a year ago.

Q: Are there any tax advantages to filing for an extension?

A: The extension primarily gives taxpayers more time to complete their returns.

However, an extension will also allow people to make 2008 IRA contributions much later in the year — as late as Oct. 15, 2009.

Also, this year, first-time homebuyers who plan to purchase a home before Dec. 1 might consider filing for an extension because they will be able to take a generous credit on their 2008 taxes.

Under the federal economic recovery package enacted in February, couples who buy a first home between Jan. 1 and Dec. 1 qualify for a tax credit of 10 percent of the purchase price, up to a maximum of $8,000. Couples making up to $170,000 a year qualify for at least a portion of the credit.

The credit can be taken on either a 2008 or 2009 tax return (sorry, you can’t take it on both). If you’ve already filed a 2008 return, you can file an amended return and get a refund, or you can claim the credit on your 2009 return.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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