6 ways to e-pay your federal tax bill
Monday, March 13, 2023
Mark this day. Tax Day is more than a month away, but I finished up the ol' 1040 today. Really!
As expected, and as usual, my tax calculations revealed that we owe Uncle Sam a couple hundred bucks. So I went to my Electronic Federal Tax Payment System (EFTPS) account and scheduled payment of our 2022 tax amount for April 18, as well as our 2023 estimated tax payments for that day and the rest of the year.
I've been a big fan of EFTPS for years, starting back when it was one of the few electronic payment options offered by the Internal Revenue Service. Now, the IRS offers many other ways to e-pay taxes.
Here's a quick review of six electronic tax payment options if you're in the same tax-due situation as the hubby and I, or you want to pay 1040-ES amounts, too.
1. Electronic Federal Tax Payment System (EFTPS): I'm starting with my preferred method. I like EFTPS because there's no added fee from my bank to use it. But you must have a financial account to use EFTPS. And while the time to set up an EFTPS has been streamlined, you still need to do so before you want to pay. To sign in, you'll have to enter your taxpayer identification number (your nine-digit Employer Identification Number, or EIN, if you're a business owner, or Social Security number for individual filers), a Personal Identification Number (PIN), and an Internet Password. The enrollment process walks you through this.
After your EFTPS account is established, you can use it to make a variety of business and personal tax payments, like the estimated amounts I scheduled. For most, you can pay as late as 8 p.m. the day before your tax payment due date. Or you can schedule for weeks or months out. If you do set up advance payments, make sure the money will be in your bank account when the dates roll around. I get an alert email from EFTPS reminding me a payment is scheduled, but since I'm a bit obsessive/compulsive about money (and taxes), I also put a note in my calendars, electronic and paper.
To set up an account and get more information, visit the EFTPS 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 e-file your return. As the name indicates, your tax payment is taken directly from your selected account. There's no IRS fee to use EFW, but your bank might charge, so check before using it. Also, again note that the EFW option is available only when you electronically file a tax return, either yourself using software or when your tax preparer e-files for you.
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 (as long as your bank doesn't charge anything), 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 via Direct Pay, you'll get immediate confirmation. However, if you do set up a payment for months ahead, I suggest you set a reminder (like I do with my EFTPS advance scheduling) before the money is moved so that you'll be sure to have the cash in the account. Bank NSF fees are almost as bad as tax penalties.
4. IRS account online payment: The IRS has been urging all us taxpayers to create taxpayer online accounts, from which we can complete a variety of tasks. One of them is making tax payments once we sign into our online accounts. In addition to the annual tax-filing payments, you can pay estimated taxes from your online account. You also can review your payment history, check on scheduled or pending payments, and even set up a payment plan if you can't pay your tax bill in one lump sum.
5. Credit, Debit or Digital Wallet: Paying by plastic is one of the oldest and most popular tax e-pay methods, so 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 has approved three companies, shown in the table below.
Fees: 1.87% of amount paid or $2.50 minimum, depending on payment type
WorldPay US, Inc.
Fees: 1.85% of amount paid or $2.20 minimum, depending on payment type
ACI Payments, Inc.
Fees: 1.98% of amount paid or $2.50 minimum, depending on payment type
Among the accepted payment methods are Visa, Mastercard, Discover, American Express, STAR, Pulse, NYCE, PayPal, Venmo, Accel, AFFN, Cirrus, Interlink, Jeanie, Shazam, Maestro, and VanillaDirect. Yeah, several of those are new to me.
Also note 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.
6. 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. The IRS says there are more than 60,000 nationwide and in Puerto Rico. This filing season that includes, but is not limited to, such popular outlets as 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 a cash tax payment store near you. I found 99 in my area.
But wait a sec. It's not as simple as heading to a store with your wad of cash for a tax payment. First you must go through a verification process that starts by going to ACI Payment or Link2Gov websites (yes, the same ones noted above that process credit and debit payments) 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.
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.
There also are payment limits, notably up to $500 per payment, although there are no daily limits on payments. You'll also have to pay a fee — $1.50 if you use ACI or $2.50 for Link2Gov — per each cash payment.
If any of these electronic payment options appeals to you, you can find more on each at the IRS' Pay Online web page.
You also might find these items of interest:
- The scoop on paying estimated taxes
- Options if you can't pay your tax bill in full
- IRS AI bots now helping taxpayers set up payment plans
- IRS backs down on ID.me online account facial recognition requirement
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