NEW YORK Aday of reckoning is approaching for some small-business owners: Oct. 15, when those who got extensions of the deadline for filing 2007 tax returns must now send in their completed forms -- and pay any tax they owe. For some owners, coming up with the money right now may be difficult, but they do have some options.

Cash flow is a problem these days for many companies, with sales down and customers slower to pay. Owners whose companies don't have lines of credit can't use that avenue to pay the IRS, and they'll likely find it's impossible to get credit in the current lending climate. So a sole proprietor in this situation has to make some decisions.

The first thing to do, according to certified public accountant Ginger Broderick, is "send in as much as you can with the return." The IRS will then send a bill for the balance due.

At that point, if an owner can't come up with the cash, he or she needs to decide whether to borrow from relatives or friends, credit cards or home equity lines -- or the government.

The first option, borrowing from someone you know, can be dicey. There can be hard feelings if the money isn't paid back as fast as the person lending the money expects, and it can be human nature to put someone you're close to last on the payback list, behind banks and other creditors.

Credit cards can be an option -- but not if your cards carry high interest rates and you owe the government a sizable amount. The debt will be very difficult to pay back, particularly when you're struggling with cash flow problems, and you could end up in deeper financial trouble.

The third option, getting an installment agreement with the IRS, can be a viable solution, and a fairly easy one. Accountants say the IRS is inclined to approve payment plans.

"I have seen them to be more workable over the last 10 years," said Broderick, whose accounting firm, Broderick & Co., is located in New York.

But, if you owe a large amount, over $25,000, and have available lines of credit, the IRS may want you to draw on them rather than owe the government, she said.

On its Web site, the IRS suggests taxpayers consider whether they would be better off borrowing from credit cards rather than obtaining an installment agreement.

The agency estimates that a $10,000 tax bill paid off over 36 months could mean payments as high as $339 per month, including 5 percent annual interest and 1 percent per month late payment penalties.

It estimates that an installment agreement would cost a total of $12,204, including that original tax bill.

If you have good credit and are able to get a balance transfer loans from a credit card, you might end up paying less. Some issuers are charging 5 percent or less on balance transfers over the life of the loan.

Some owners might be tempted to dip into retirement funds to pay their tax bill. They need to keep in mind that this can be very costly -- the IRS will levy a 10 percent penalty if you're younger than 59½, and the money you withdraw will be treated as income that's taxable for 2008.

The best thing to do first is consult an accountant or other tax professional who can help you crunch the numbers.

But you should probably look for the least burdensome option -- given the continuing uncertainty in the economy and the fact there's no end in sight for the problems in the financial system, you don't want to limit options that you might need in the future.

Broderick noted that an installment agreement for amounts overmore than $10,000 can be noted on your credit history, so you need to be aware that this could affect your credit applications in the future. Her suggestion is to try andto whittle down your tax bill to keep it below that threshold.

If you do decide you'd rather owe the government, the process for obtaining a payment plan is fairly simple if your total bill is $25,000 or less.

You'll need to complete IRS Form 9465, Installment Agreement Request, and mail it in, or you can apply online at the IRS Web site, www.irs.gov. You can download Form 9465 at the site.

The information the government requests in such cases is fairly simple, such as the name of your bank and how much you plan to pay. In the instructions accompanying the form, the IRS says it usually notifies a taxpayer within 30 days if an application is approved.

If you owe more than $25,000, you'll have to supply the government with detailed financial information, filling out Form 433-F, Collection Information Statement.

It calls for you to list all your sources of income and all your assets, including bank accounts, retirement accounts, real estate and vehicles.

And you have to list all your monthly payments as well, everything from mortgage payments down to your cable TV bill.
Joyce M. Rosenberg writes for The Associated Press.