7 ways to pay your tax bill
Friday, March 06, 2020
You finished your tax return and the news is not good. You owe Uncle Sam money.
Don't freak out, at least not yet. Your payment isn't due until April 15. That gives you time to figure out how to come up with the cash and/or get it to the U.S. Treasury.
The Internal Revenue Service, naturally, has some suggestions.
Let's start with the agency's new favorite tax payment method. Yep, I'm talking electronic. You have several digital options.
1. Credit, Debit or Digital Wallet: Paying by plastic is one of the oldest and most popular tax e-pay methods. As the header notes, this method has been buffed up to also allow digital wallet payments. For those of you who are still just looking at that icon on your smartphone, you enter payment information into your digital wallet and then use the password-protected app to make purchases … or pay your taxes.
The payments are made through IRS-authorized processors. This filing season they are PayUSAtax, Pay1040 and Official Payments.
Among the accepted payment methods are Visa, Master Card, Discover, American Express, STAR, Pulse, NYCE, Accel, Visa Checkout, MasterPass, Amex Express Checkout, PayPal. Note, however, that every payment option just listed isn't accepted by all. So double check before selecting a payment method and/or processing company.
One thing that is the same is that all three credit payment processors charge a fee. And no, the IRS doesn't get any portion of it. The minimum transaction fees are:
You can find more in the payment processor fee comparison section of the IRS credit/debit card tax payment webpage.
If you have a big tax bill, the fees can add up. And they can grow if you don't pay off your card balance in full or as quickly as you can.
But using a credit card can be positive if you earn points or other rewards for all your charges.
2. Electronic Funds Withdrawal (EFW): With EFW, you file your return and pay electronically from your selected bank account when you use tax preparation software or hire a tax professional to do the job electronically. As the name indicates, your tax payment is taken directly from your noted account. EFW is free, but is only available when you electronically file a tax return.
3. Direct Pay: This is similar to EFW, but you push the payment out to the IRS rather than it pulling it from your account. You decide which account, for example, checking or savings, you want to use. Direct Pay also is free, doesn't require any preregistration and payments can be scheduled up to 30 days in advance. When you send your due taxes vial Direct Pay, you'll get immediate confirmation. If you plan to keep using this payment method, say for estimated taxes or next year's tax filing if you find you owe then, too, you can opt-in to email notifications about each Direct Pay transaction.
4. IRS2Go: The IRS' mobile app's many options include a way to make a tax bill payment. There's no cost to download IRS2Go and using it to make tax payments via Direct Pay also is free. If, however, you use the app to pay your tax bill by debit, credit card or digital wallet through an approved payment processor, you'll pay a fee. IRS2Go is available from Google Play, the Apple App Store or the Amazon App Store.
5. Electronic Federal Tax Payment System (EFTPS): Personal note here. Eff-Tips, as this electronic payment method is known thanks to its acronym, has long been my preferred e-payment option. Here you have your taxes paid directly from your selected financial account.
EFTPS is available to both individual and business taxpayers. You can schedule a variety of tax payments well in advance. I like to set up all my estimated tax payments at once. Then all I have to worry about is making sure money is in my account when the pay date arrives.
And like several other IRS e-payment methods, there's no cost to use it.
However, you must enroll in EFTPS beforehand and that could take some time. To set up an account and get more information, visit the EFTPS.gov website or call toll-free (800) 555-4477.
6. Pay by cash: Although this method involves actual currency, it's really a hybrid e-payment option. By using this option, dubbed PayNearMe, you bring the cash amount you're paying to a participating retail partner (mostly 7-Eleven convenience stores). It's then sent from there to the IRS using Official Payments' technology. Yes, the same company that handles your credit, debit or digital wallet payments.
There is a $1,000 limit per day that can be sent to the IRS. You'll also owe a $3.99 fee for each payment.
The PayNearMe cash tax payment method also involves four-step process and generally takes five to seven days to complete your payment. So if you're interested, you need to start early enough to ensure your payment is posted in a timely manner, saving you from late-payment penalties and interest charges. You can find more on the process in my earlier blog post, as well as at the IRS' cash payment web page.
7. Check or Money Order: Some folks still write checks. I'm one of them. Even though I pay most of my bills, include tax ones, electronically, I snail mail old-fashioned paper checks to cover doctors' bills (decided on this route years ago after a crook tried to use the number of the credit card I had used to pay a physician) and for charitable donations (good tax documentation of my deductible contributions).
In addition to being a paper record of your payment, sending a check (or money order) has another advantage. The payment doesn't have to be there on the tax due date. As long as the envelope in which it was mailed is postmarked by the deadline, the IRS considers you as having made a timely payment. Depending on when the check is cashed, you get a few more days of the money in your bank account.
If you do pay your tax bill with a check (or money order), make it out to the "United States Treasury," not the IRS, despite that tongue-in-cheek check picture at the top of this post.
Also, to help ensure your payment is promptly and properly credited, enclose a Form 1040-V payment voucher. And print on the front of the check or money order "2019 Form 1040," as well as your Social Security number, along with your name, address and daytime phone number if that info isn't already on your check.
So now you have lots of ways to pay that tax bill. And some time to figure out how to come up with the money or make room on a credit card!
You also might find these items of interest:
- IRS offers new private tax collector payment option
- Ways to pay that IRS bill that arrived in your mailbox
- Owe Uncle Sam at tax time? Here are some ways to pay
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