This was a win-win situation. The collection authorities got a pretty good rate of return on their money as long as I kept up my payments, and I got to pay my tax bill on fairly reasonable terms (and without the credit-card fine print about how the interest rate could change at any time for any reason). If it was possible to have a favorite creditor, for me, the IRS was it.
The next year I again found myself owing money (though this time, less) to the IRS, and I did exactly what you think. I called them up again, wondering whether it was possible just to add this new year of back-tax payments on to the slowly diminishing sum I owed. And, lo, indeed it was. Not only was it possible, but it could be done without even raising the monthly payment. So I gave the IRS its modest $45 fee for setting up a "new" payment plan and settled back into my regular mode of financial irresponsibility.
This had exactly the result you might expect: Last year, I yet again owed money to the federal government, this time a truly spectacular sum. I picked up the phone to call the IRS then put it down. Poured myself a scotch, drank it, picked up the phone again, put it down again. After several days of this, I finally reached the point where I could see no option other than making the call and throwing myself on the tax authority's mercy.
So again I found myself talking to a stunningly sympathetic federal employee, who told me that, yes, the situation was very serious. I would have to come up with a new payment plan.
"So, how much do I need to pay?" I asked.
"Well, how much can you afford?" he asked. His tone was grave enough that I envisioned a year of living on spaghetti and ketchup.
We went around like this for a couple of minutes, as I subtly tried to discern exactly how low a monthly payment would be acceptable. Clearly, I wasn't the first person to have tried to figure out exactly where that minimum was, and there wasn't going to be an answer until I ventured at least a guess about how much I could afford. So I did and came out with a number that I really could comfortably afford—which I was sure was going to be way too low.
It wasn't. Two more minutes, another $45 fee, and I had set up a new plan. This one let me stretch out my payments over an even longer period. Now, there are certainly those who will be shocked at the notion that I would actually want to stretch out my debt to the IRS for years in the future. These are the people to whom almost all financial advice is geared. They are not the people who have a running balance on their credit cards sufficient to pay a year's tuition at a prestigious private university. In other words, those people are not me. And if you are reading this on April 15 while putting a stamp on the thin envelope with your extension request and wondering how you're going to pay your taxes, they are not you.
If you fall into the category of the irresponsible and cash-flow-troubled, there is rarely going to be a financial column that offers you any advice. The people who have let their finances slip into a state of disarray and are the ones in most urgent need of financial advice do not get it. Or the rare times when they do, it is the kind of advice—tighten your belt, plan better for next year—that they are sure not to follow this year for the same reasons that they didn't follow it last year or the year before. The magic of the IRS payment plan is something that you're expected to find on your own, and only if you let things go way off the rails.
So if you're sitting at your computer wondering when the IRS will come for you, know that in this new customer-centric age of collections, you can go to them without quaking in terror. Yes, next year or the year after or some year in the future, you will get your act together and be in the black on April 15.
But if you're wondering what the hell you're going to do in the here and now, then calling up the IRS might be a much better option than emptying out your bank account or maxing out your credit cards. Fortify yourself with a drink if you need to, but know that owing money to the government is not the end of your life as you know it but, potentially, the beginning of a surprisingly amicable financial relationship.