April 15 is rapidly approaching and if you’ve had a less than prosperous 2009, you may be wondering if you can afford to file your 2009 income tax return.

Here’s why you can’t afford not to.

Many people are aware that there are interest and penalties assessed by the Internal Revenue Service (IRS) on unpaid tax, but most aren’t aware that there are two separate penalties – a Late Payment Penalty AND a Late Filing Penalty.

The Late Payment Penalty is equal to 1/2 percent (.005) of the unpaid tax for each month it remains unpaid, and can increase to 1 percent (.01) per month of the unpaid tax beginning on the 10th day after the IRS issues what is called a “Notice of Levy.”

The maximum Late Payment Penalty is equal to 25 percent of the unpaid tax. The Late Filing Penalty is equal to 5 percent of the unpaid tax for each month it remains unpaid, up to a maximum of 25 percent. While the maximum penalty rate is the same for both types, you will reach the maximum in only five months for the Late Filing Penalty, while it would take over four years to reach the maximum penalty for the Late Payment Penalty.

The lesson here – file your return even if you can’t afford to pay the balance due.

Now that I’ve convinced you to file your 2009 income tax return, what are your options if you can’t afford to pay the balance due?

Here are a few options you might want to consider:

• Monthly payments through an Installment Agreement (File Form 9465).

• Temporary delay or significant hardship consideration, or Offer in Compromise (consult a CPA or a Tax attorney).

• Take a cash advance on your credit card.

• Obtain a bank loan

• Liquidate savings and/or investment accounts.

• Borrow against 401(k) accounts or life insurance cash value.

Requesting a temporary delay, significant hardship consideration, and/or an Offer in Compromise from the IRS can be a lengthy, expensive, frustrating process.

Installment Agreements are more easily obtained, but interest and penalties do not stop with an installment agreement. Sometimes, an interest rate on a loan or credit card may be lower than the combination of penalties, interest, and fees imposed by the IRS on an Installment Agreement.

Research your options before moving forward with a request for an Installment Agreement to ensure you are making the best decision for the long term.

But most important – just file your return or extension by April 15.