Tax Day 2022 is less than a month away. Most of us think of it as the day our tax returns must be filed, and that's true. But it's also the day that any tax you owe must be paid.
If you miss either task, the Internal Revenue Service will slap penalties and interest onto your tax bill.
The easiest way to do both is electronically.
Here are five ways the IRS will accept your e-payment.
1. Electronic Federal Tax Payment System (EFTPS): This is the e-payment system that I've used for years. In fact, I just set up next month's tax bill payment before working on this post. Eff-Tips, as this electronic payment method is known thanks to its acronym, is accessible by phone or online. With EFTPS, you schedule tax payments to be made 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.
There is cost to use it, but 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.
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 e-pay way is similar to EFW, but you push the payment out to the IRS rather than having it pulled 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 365 days (yep, a year for all y'all very long-planning taxpayers) in advance.
When you send your due taxes vial Direct Pay, you'll get immediate confirmation. However, if you do set up a payment for months ahead, I suggest you set a reminder before the money is moved so that you'll be sure to have the cash in the account. Bank NSF fees are almost as back at tax penalties.
4. Credit, Debit or Digital Wallet: Paying by plastic is one of the oldest and most popular tax e-pay methods, so the Uncle Sam happily accepts our credit or debit cards. As we've also come to rely on mobile devices, the IRS also has added digital wallet payments.
The payments are made through IRS-authorized processors. And like all plastic transactions, there's a service charge. With taxes, however, we taxpayers cover this cost instead of the retailer, or in this case, the IRS.
This filing season the IRS accepted companies are ACI Payments Inc., Pay1040, and PayUSAtax. Their fees are shown below.
Among the accepted payment methods are Visa, Mastercard, Discover, American Express, STAR, Pulse, NYCE, Accel, AFFN, Cirrus, Interlink, Jeanie, Shazam, Maestro, PayPal. Note, however, that not every payment option is accepted by all tax payment processors. So double check before making your choice of payment and/or processing company.
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 to pay your taxes can be positive if you earn points or other rewards for all your charges.
5. Cash: Although this method involves actual currency, it's really a hybrid e-payment option. You bring the cash amount you're paying the IRS to a participating retail partner. This filing season that includes Dollar General, Family Dollar, CVS Pharmacy, Walgreens, Pilot Travel Centers, 7-Eleven, Speedway, Kum & Go, Royal Farms, Go Mart, and Kwik Trip stores. Check out the interactive map to find one near you.
But wait. There's more. Before you head to a store with your wad of tax payment cash, you must go through a verification process that starts by going to ACI Payment Inc. and following the instructions to make a cash payment. It involves several emails and IRS validation before you get a payment code you use at the tax cash payment store.
There also are payment limits, notably up to $1,000 per day and 2 payments per day. You'll also have to pay a fee of $1.50 per each cash payment.
Because of the process, start early enough to ensure your tax payment is posted in a timely manner. You don't want to go through all these steps and still end up making a late payment.
If any of these electronic payment options appeals to you, you can find more on each at the IRS' Pay Online web page.
Two traditional ways to pay: OK, you're not into digital tax transactions. That's fine with Uncle Sam, too. He still accepts old-school paper checks (the sixth way to pay) or (#7) money orders.
If you fill out one of these paper payment options, be sure to make the check or money order payable to the United States Treasury, not the IRS. Also print on the front of the check or money order 2021 Form 1040, along with your name, address, daytime phone number, and Social Security number.
The IRS also recommends that you also enclose a Form 1040-V payment voucher to help ensure your payment gets credited promptly.
Don't miss the deadline: Regardless of which payment method you use, don't miss the deadline, even if you can't pay your full bill.
By paying any amount you can, you let the IRS know that you're aware of your tax obligation. And sending some money will reduce your tax due balance subject to those pesky penalties and interest.
Remember, too, that a filing extension doesn't get you off the payment hook. The extension's six extra months is for filing your return only. You still must pay what you owe — or a good guestimate of it — by April 18.
You also might find these items of interest:
- Important tax dates in 2022
- The scoop on paying estimated taxes
- Tax statements you need to file your 2021 return