Owing the IRS more than you can pay is unnerving, because it’s not a debt you can ignore. However, if you should find yourself in this situation, the most important thing to do is to follow the first instruction from the IRS: “Don’t panic.” Once you have managed to transition from fear mode to methodical planning, here are the steps you should take:

File your tax return on time

Even if you can’t pay the full amount, you should file your tax return by the regular deadline, and include a payment for as much as you can afford. Hiding from the debt by not filing just gives you two problems instead of one. Also, filing for an extension won’t help, because IRS rules say you’re supposed to pay what you owe by the regular deadline even if you file your official return six months later.

Call the IRS

Just like any other creditor, the IRS would like to hear from you directly. You can call them at 1-800-829-1040 to discuss a payment plan that will work for you. If you have filed your tax return on time and owe less than $50,000 total including penalties and interest, you can file an Online Payment Agreement Application. In some instances, the IRS will waive the penalties associated with overdue tax payments although they are not able to waive the interest that will accumulate on late taxes.

Borrow the money if possible

While the IRS is willing to allow you to pay off your tax debt over time, they do point out that it is to your advantage to get this obligation cleared up as soon as possible — even if that means borrowing the money. The reason is that their combination of interest and penalties is likely to be more expensive than the interest you’d pay on a credit card or other loan. You can try an online loan, like from Lending Club, which usually has a lower interest rate than an online loan.

Approach tax settlement firms with caution

Tax settlement firms advertise the ability to persuade the IRS to accept less than you owe. This process, which is called an “offer in compromise,” can be initiated directly by the individual taxpayer as well. It’s important to know that fewer than 10 percent of such settlement requests are granted by the IRS.

Whichever route you decide to take, you will need to square things up with the IRS. The government has the power to seize assets and garnish wages. If you deliberately misrepresented your income, you may suffer criminal penalties as well. Work out your payments and you can still enjoy a pleasant post-tax-audit life.