Image source: Getty Images.

With the extended tax deadline coming up on October 15, many people will find themselves owing the IRS money. And not all of them will be able to pay the entire balance owed -- at least not right away. If you find yourself indebted to the IRS, or if you already are, here are your options.

Can you pay right away?

To be perfectly clear, your taxes were due on April 18 -- even if you filed an extension. Any balance remaining after that time will face interest and penalties. The IRS' interest rate is currently 4% per year, and the penalty for late payment of taxes is 0.5% per month or fraction of a month that you're late. So, if you file your return by the extended tax deadline and discover that you owe money, you can be charged interest and penalties retroactively to the original tax deadline.

Therefore, the sooner you can pay your balance, the better. If you are in a position where you can pay the entire balance when you submit your return, that's the best option. Of course, that's not always possible (or practical).

Can you pay soon?

If you can't pay in full right away, but will be able to pay your balance soon, you can apply for additional time to pay in full -- up to 120 days. You can apply online, and there is no fee for this type of agreement, making it more economical than a payment plan, which I'll discuss shortly.

Be aware, however, that interest and penalties will continue to accumulate until the debt is paid in full. To put this in perspective, if you owe the IRS $5,000 and take the full 120 days to pay, you can expect roughly $167 tacked on to the balance. After you apply for the agreement, the IRS will give you a total amount due that includes the interest and penalties, so you'll know exactly what you need to pay.

Do you need more time?

If you can't pay the balance in full within 120 days, your other option is an installment agreement. Essentially, by entering into this type of agreement, you're agreeing to pay your unpaid tax liability over time with monthly payments.

If you owe the IRS less than $50,000 ($25,000 for businesses), you can apply for an installment agreement online, and the process is relatively painless -- just a short form, and a virtually automatic approval process. If you owe more than $50,000, you can still apply for a payment plan, but you'll need to do it by mail (link opens PDF) or over the phone. There's just some extra paperwork involved.

You can divide your unpaid tax bill into as many as 72 installment payments, just be aware that the longer you take, the higher your interest and penalties will become. There is also a one-time $120 fee for setting up the installment plan, which is reduced to $52 if you agree to set up a direct debit from your bank account.

The IRS may work with you if you still have trouble paying

If you can't pay the amount due in full or through installments, don't ignore the situation. There are other options available.

Specifically, you can request an Offer in Compromise if you have insufficient income or assets to pay the full amount due, or if paying the full amount due would cause you an economic hardship. You'll need to demonstrate that you're financially unable to pay your tax debt in full, and if approved, this can allow you to settle your outstanding tax debt for less than you owe.

Or, you can ask the IRS to delay collection until you're able to pay. The IRS will still charge applicable interest and penalties, but it's certainly a better situation than the IRS' usual collection process for unpaid tax debts.

The bottom line is that the IRS wants to work with you to get your taxes paid. There are several options available if you can't pay, so decide which one you can manage, and get the process started.