You’ve assembled and organized all of your tax documents to meet the April 15 tax filing deadline, and you’ve discovered that, unfortunately, you didn’t have enough tax withheld or make enough estimated tax payments. As a result, you owe Uncle Sam this year. If you normally get a refund, you might be financially unprepared for an unexpected tax bill.
The good news is that, as intimidating as the IRS might seem, its employees try to make paying any taxes due easy. If you’re wondering how best to pay your taxes this year, here are the options available to you.
Ways to Pay Your Taxes
The IRS offers several free or low-cost options to pay the amount you owe. Be sure to choose a payment method that allows enough time for the IRS to receive your payment before the deadline to avoid late payment penalties and interest.
1. Direct Debit
Direct debit to your checking or savings account is one of the fastest ways to satisfy a tax debt. Most of the best online tax preparation software like H&R Block has this option. Even some of the free tax software options take care of this for you.
All you need is your bank’s routing number and your account number. These numbers appear at the bottom of your checks. The nine-digit routing number is first, followed by your account number. A check number usually follows the account number; you don’t need that because you’re not using an actual check. Instead, you’re doing an Electronic Funds Withdrawal (EFW) transfer from your little pot of gold to the IRS coffers.
In most tax software, the default payment date is the due date of the return – typically April 15. However, to manage your cash flow, you can specify an earlier date when you’d like the payment siphoned from your account.
No matter when you make the payment, your best bet is to pay the balance due in full to avoid the penalties and interest the IRS assesses on late payments.
And remember, even if you request an extension, it’s only an extension of time to file your return, not an extension of time to pay the tax you owe. Do what you can to pay on time, as the late payment penalty is 5% of your unpaid taxes per month, which can build up to as much as 25% of your unpaid taxes. You’ll owe interest on the outstanding balance as well.
2. IRS.gov Direct Pay
If you don’t e-file or choose not to have your payment direct-debited, another secure (and free) option is IRS Direct Pay. There are five steps to this process:
Step 1: Provide Your Tax Information
This includes the payment type, applicable form number, and tax period. For example, to pay the balance due for a 2020 income tax return, you’ll select the “Tax Return or Notice” option from the “Reason for Payment” drop-down box. Under “Apply Payment To,” select “1040,” and under “Tax Period for Payment,” select “2020.”
You can also use the Direct Pay system for reasons such as to make an estimated payment, pay the balance due with an amended return, or make a payment on an installment plan.
Step 2: Verify Your Identity
After confirming your previous selections, you’ll select a tax year for verification. Select a prior tax year from any of the preceding five years. You’ll need to enter your filing status for that year, first and last name, Social Security number (SSN), date of birth, and country of residence.
Next, enter your address as it appeared on the tax return for the year you chose. If you’ve moved since filing that return, make sure you enter your old address, not your current address. Then check the box to accept the Privacy Act and Paperwork Reduction Act terms. You can click the link if you want to read the terms before signing.
If the system can’t verify your identity, it will advise you to double-check your entries or try a different tax year. After a few failed attempts, a message will appear directing you to another payment choice.
Step 3: Enter Your Payment Information
Once the system verifies your identity, you’ll need to enter your payment amount and the date you want the payment to be applied. You’ll also provide your bank’s routing number and your account number and mark whether the account is a checking or savings account.
If you’d like to receive a confirmation email, check the box confirming that you want email notifications and provide your email address.
Once you hit “Continue,” a pop-up box will ask you to read and agree to an agreement authorizing the bank to make the payment and work with the IRS to resolve any issues that might arise from the transaction.
Step 4: Review & Electronically Sign for the Transaction
After you agree to the authorization agreement, it’s time to review and sign for the transaction. Double-check all of the information you provided and make changes if needed. Then enter your first and last name and SSN to electronically sign the return, click the box to accept the authorization agreement, and hit “Submit.”
Step 5: Print or Record Your Online Confirmation Number
The next screen provides a confirmation number, the amount of your payment, and the date of the payment. Write this down or print a copy of this confirmation page for your records.
If you provided your email address in Step 3, you’ll receive an email confirmation, but the email will only have the confirmation number. It won’t show the amount paid, although you can use the confirmation number to look up that payment later.
Direct Pay is available Monday through Saturday from 12am to 11:45pm EST, and Sunday from 7am to 11:45pm EST.
3. Debit or Credit Card
If you prefer to pay by debit or credit card rather than by electronic funds withdrawal from your bank account, you can opt to use a third-party payment processor to handle the transaction.
Though this method is secure, they will charge a processing fee. The fees for available third-party payment processors are:
- PayUSAtax: Debit card, $2.55; credit card, 1.96% of transaction amount (minimum of $2.69)
- Pay1040.com: Debit card, $2.58; credit card, 1.99% of transaction amount (minimum of $2.58)
- ACI Payments: Debit card, $2.00 ($3.95 for payments over $1,000); credit card, 1.99% (minimum of $2.50)
There are a few things you should know about using this method of payment. According to the IRS:
- Fees differ from those shown above when you choose the integrated IRS e-file and e-pay option.
- Not all IRS forms are eligible for payment by credit card or debit card, and there are limits on how often you can make payments.
- If you need to make a payment of $100,000 or more, you might have to coordinate the payment with your bank or credit card company.
- You usually can’t cancel payments.
- You can’t make federal tax deposits.
- You can’t get an immediate release of a federal tax lien.
- Paying by credit or debit eliminates the need for a payment voucher.
- Your bank or credit card statement will list this payment as “United States Treasury Tax Payment.” The convenience fee paid to your provider will show up as “Tax Payment Convenience Fee” or something similar.
- If you overpay, the IRS will refund the overpayment after processing your return, unless there are offsets or debts on your account.
When you visit a third-party payment processing site, you’ll be asked to enter your name, SSN, date of birth, address, and phone number. Next, you’ll input your payment amount, card number, expiration month and year, and the CVV code from the back of the card.
When you click “Continue,” you’ll have a chance to review, edit, or cancel the transaction. If you want to continue, check the box to agree to the terms and conditions and press “Process Payment.” Once payment is complete, you’ll receive a confirmation number.
Do you want to pay your taxes while you wait in line for your morning cup of coffee? If so, you can download the free IRS2Go app on your mobile device. With this app, you can check your refund status, make a payment through IRS Direct Pay or a payment processor, locate free tax help, and follow the IRS’s social media channels – all on your smartphone.
5. Electronic Federal Tax Payment System
There is yet another electronic method to pay your tax liability: the Electronic Federal Tax Payment System (EFTPS), a sanctioned IRS service. To use this service, you must first enroll and obtain a PIN. Then, when you log in to make a payment, there is a three-factor verification: your SSN or EIN, your PIN, and a password.
When you first enroll at EFTPS, the site will need to verify your identity, after which, you’ll receive your PIN via U.S. mail in seven business days. Once you have your PIN, you can log into EFTPS and create a password.
You can schedule payments on EFTPS up to 365 days in advance of the due date. Keep in mind, though, that you need to schedule your payment at least one calendar day before the due date by 8pm EST for it to reach the IRS on time.
The service also has a voice response system you can call to make your payment if the website is down; that number is 1-800-555-3453. You’ll still need your SSN and your EFTPS PIN to make a payment over the phone.
6. By Mail
If you have a balance due when your return is complete, your tax preparation software will generate a voucher (Form 1040-V) for the amount due. Along with the voucher, you may send a personal check, money order, or cashier’s check made payable to “U.S. Treasury.” Do not staple the check or money order to the voucher.
Whichever payment method you use, be sure to include the following information on the check or money order:
- Your name
- Your address
- Your daytime phone number
- Your SSN
- The tax year and form number (for example, “2020 Form 1040”)
That way, if the check and voucher get separated, the payment will still get credited to your account. Where you send your payment depends on where you live. Visit the IRS website to find out where to mail your tax payment.
And don’t just drop your payment in the mailbox. You’ll want to send that payment by registered or certified mail so that you have proof you mailed it on time.
If you prefer to pay cash, the IRS has cash options available at participating retail stores around the country, including some Dollar General, Family Dollar, 7-Eleven, Kum & Go, Speedway, Walgreens, and CVS stores. However, it’s not as easy as walking into a store and handing the clerk your cash.
First, you need to visit ACI Payments, select the type of payment you want to make, enter the amount you want to pay, and select “Cash” as your payment option. Then follow the instructions to make a cash payment. You’ll receive an email with a barcode and instructions. You can either print the payment code or send it to your smartphone.
Finally, you’ll visit the store listed in the email and ask the clerk to scan your barcode. The store will give you a receipt after they accept your cash. It can take a few days for the IRS to validate your information to send the barcode and another two business days for the payment to post to your account.
Visit VanillaDirect Pay to see if there’s an authorized payment location near you. Before you go this route, however, there are a few things you should know:
- There is a fee of $1.50 per payment.
- The whole process can take five to seven business days, so start it well before the payment due date to avoid interest and penalties.
- Payments are limited to $500 per transaction and $1,000 per day.
What If You Can’t Pay All at Once?
There are a couple of options for paying your tax liability if you’re unable to pay it all at once.
1. Installment Plan
You can set up an installment plan if you owe less than $50,000 in combined tax, penalties, and interest.
The IRS charges setup fees for payment plans lasting longer than 120 days. These fees range from $31 to $149, depending on whether you apply online or over the phone and whether you make your payments via direct debit or another method.
Low-income taxpayers may qualify for lower fees or to have their fees waived entirely. You can find additional information on the IRS payment plans information page.
2. Extension of Time to Pay
If financial hardship makes it impossible to pay your tax obligation by the deadline, you can apply for an extension of time to pay. This is done on Form 1127. Use the chart on page 3 to determine if this is the right option for you. The IRS must receive the form and supporting documentation on or before the due date of the return.
If your application is approved, the IRS won’t charge late payment penalties for the duration of your extension. However, interest will still continue to accrue until the balance is paid in full.
The IRS rarely grants extensions of time to pay longer than six months, so if you’re applying, be sure you can pay within 180 days. You must pay the tax before the extension runs out.
Even if you set up an installment agreement, the IRS will continue charging interest and penalties on the balance you owe until you pay it in full. So if you owe money when you file your return, your best bet is to pay as much as you can by April 15, then set up an installment plan to pay the balance in under 120 days so you can avoid the setup fee.
Your best bet is to use direct debit and make sure the money is in your account by the scheduled payment date. You don’t ever want to default on IRS debt. If you set up a payment plan with the IRS and default on your agreement, the IRS can terminate your agreement and start the collection process, which can include filing a federal tax lien, levying your wages, and seizing the balance in your bank accounts.