No one wants to end up with a tax bill. But if you do owe money for taxes, you'll want to know what your payment options are. Here's how to pay taxes and how to decide which option is right for you.
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1. Direct pay
When looking into how to pay taxes for free — without any fees — direct pay is one option. With this method, you can pay a tax bill directly from your checking or savings account, and you'll receive instant confirmation when the payment is made. You can schedule payments up to 30 days in advance, and you can change or cancel a payment up to two business days before the scheduled payment date.
2. Electronic Funds Withdrawal
Electronic Funds Withdrawal (EFW) is another way to pay taxes, but in some cases, you may have to pay a small fee to your financial institution. You can only use this payment method if you e-file your federal taxes by using tax preparation software, tax professional, or IRS Free File. With EFW, you can submit one or more payments through direct debit from your bank account, and you can also schedule payments up to 365 days in advance.
3. Electronic Federal Tax Payment System
You can also pay your tax bill using the government's Electronic Federal Tax Payment System (EFTPS). You'll use your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN), a personal identification number (PIN), an internet password, and a secure browser to make a payment through this system. It can take up to five days to process your enrollment in this service, and you can complete the initial paperwork online or over the phone. With EFTPS, you can schedule payments up to 365 days in advance, and you'll receive an immediate confirmation upon payment.
4. Credit and debit cards
You can use your debit or credit card to pay your tax bill online or over the phone. The IRS doesn't charge a fee for this service, but the service providers charge a fee for processing the payment. The three providers — PayUSAtax, Pay1040, and ACI Payments, Inc. — charge a fee. Debit card transactions are often between $2 and $4. For credit transactions, the fee is based upon a percentage of the payment amount. For instance, for a credit transaction of $1,000, the taxpayer may be charged a fee of $19.90 while a credit transaction of $10,000 would cost the taxpayer a fee of $199. The IRS accepts Visa, Discover, American Express, Mastercard, STAR, Pulse, NYCE, Accel, PayPal, and PayNearMe
5. Check or money order
The IRS also accepts checks or money orders for your tax bill. These should be written out to the United States Treasury. You'll also need to complete and submit Form 1040-V along with your payment. Your form and check or money order should be mailed to the appropriate address that can be found on the back of your 1040-V. Make sure your check includes all of the following information:
- Your name
- Your address
- Your phone number
- Your SSN or ITIN
- The SSN of the first person listed on your Form 1040 (if filing jointly)
- The tax year for which you're paying the bill
- The type of individual income tax return you completed
- Your payment amount is written in this exact way: $XXX.XX (no dashes or lines)
You can use cash to pay your tax bill, but you can't mail cash to the IRS. You'll need to visit a cash processing company or retail store. Many popular convenience stores and pharmacies offer this service, or you can make a payment at an IRS Taxpayer Assistance Centers (TAC).
- If paying via an IRS retail partner, you'll first go to the ACI payments website and follow the instructions to set up a cash payment.
- Then, you'll receive an email verification code that you can print or save to your smartphone.
- You'll show that code to the cash processing company or retail store, and it will charge a fee of either $1.50 or $3.99 for processing your cash payment.
- If paying via Taxpayer Assistance Centers, you’ll first call at least 30 to 60 days in advance to schedule an appointment to pay.
- On the phone, you’ll provide an estimate of how much you plan to pay and which bills you’ll be using to pay that amount. You’ll then take your money and paperwork to your appointment where you can also schedule future appointments if needed.
7. Short-term payment plan
If you can't pay your tax bill immediately due to temporary factors, you can request an extension.
- You'll need to first file your tax return and then apply for an installment agreement through the IRS. A short-term agreement must be paid in full in less than 120 or 180 days.
- Whether a taxpayer has 120 or 180 days to pay is determined by the application method. Those who apply online have 120 days to pay while those who apply by phone, mail, or in-person have 180 days to pay.
- There are no fees to apply for the short-term payment plan, but interest and penalties will apply to the full taxes you owe until they're paid off.
- Also, you must owe less than $100,000 in combined tax, penalties, and interest to apply for this extension.
You may also qualify for an extension through Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship. Prior to filing Form 1127, you'll also need to file your income tax return.
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8. Long-term payment plan
The most common way to handle a tax bill that you can't pay immediately is to set up a long-term installment agreement. If you're applying for a long-term payment plan and owe less than $50,000, then you can apply for the agreement online.
- The IRS charges a fee for this application, and the fee is higher if you apply over the phone or in person.
- Although you'll be charged interest and late payment penalties until you pay the taxes you owe in full, the failure to pay rate is decreased from .5% to .25% per month while your installment agreement is in effect.
When setting up an agreement with the IRS, you'll specify the monthly amount as well as the day each month that you'll make the payment. Your monthly installment amounts should be based on your ability to afford the payments so that you won't default on the agreement. The IRS typically responds to an installment agreement request within 30 days of the application. When on an installment plan, you can make payments using any of these payment methods:
- Direct pay
- Payroll deduction from your employer
- Check or money order
- Credit or debit card
- Online Payment Agreement (OPA)
9. Offer in Compromise
If you can't pay your tax bill due to a permanent factor such as a job loss or business failure, you can request an Offer in Compromise (OIC) from the IRS.
- With this agreement, the IRS will agree to a reduced tax bill to be paid in full due to your circumstances.
- To be considered for an OIC, you must have filed your taxes and be current in all payment requirements to the IRS.
- You can't apply if you're currently involved in bankruptcy proceedings.
- There's a fee for an OIC application unless you're able to meet the Low-Income Certification guidelines.
10. Temporarily delay the collection process
You may need this type of agreement in the event that you can't pay your full tax liability in the foreseeable future (as opposed to a short-term hardship). If you can't pay any of your tax debt, then your account could be classified as "currently not collectible." The IRS could then approve and temporarily delay collection until your financial condition improves.
Being currently not collectible doesn't mean the debt goes away; it means the IRS has determined you can't afford to pay the debt at this time. Prior to approving your request to delay collection, you may be asked to complete a Collection Information Statement (Form 433-F, Form 433-A, or Form 433-B) and provide proof of your financial status, including information about your assets, monthly income, and expenses.
Tax billing questions
If you have questions about the amount you owe, you should contact the IRS to discuss bills, interest, and payment options. The IRS will be able to direct you to your account and in some cases, may be able to waive penalties. If you want to appeal a tax decision, the IRS also has an extensive appeals process.
The federal income tax deadline is July 15, but if you can't file in time, you can file Form 4868 to ask for a six-month extension.
- It's important to note that an extension will give you more time to file your return, but it doesn't give you more time to pay your tax bill.
- Any amount you owe that isn't paid by the tax deadline will begin accruing interest and penalties.
- To avoid this, you can estimate your tax bill and send that amount to the IRS with your request for a filing extension.
You can avoid falling victim to a scam by remembering that the IRS never starts conversations with taxpayers through email, social media, or text messages.
- In most cases, you'll receive an official letter in the mail if the IRS is trying to contact you.
- IRS agents will never demand immediate payment or threaten you in any way to receive payment. Also, remember that when you're making payments to the IRS, you should never make a wire transfer or use a preloaded debit card.
- Only use the approved methods as outlined above to pay the IRS.
Whichever method you choose to pay your taxes, don't hesitate to start the process as soon as you can. You should also file your income taxes immediately as many of the repayment options require that you file first even if you can't pay in full when filing. Filing your taxes as soon as possible can help you avoid a higher bill from more penalties and interest accruing as time passes.
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