Owe Taxes? How to Pay the IRS

How to Pay Your Taxes Electronically or by Paper Check

You've finished your tax return only to realize that you owe the Internal Revenue Service. Having a balance due to the IRS is never welcome news, but you have some options for paying what you owe, even if it's more than the cash you currently have on hand. 

File an Extension 

You can get an automatic extension of six more months to file your tax return by submitting Form 4868 to the IRS. This gives you 180 more days to thoroughly review your return.

Look for deductions you might have missed or miscalculations. Consult a tax professional if necessary — you may be eligible for a tax credit or deduction that you're not even aware of. The idea is to reduce your preliminary tax debt if at all possible.  

Ideally, you should pay your entire tax balance at the time you submit a request for an extension of time, but if you don't have the money, at least remit as much as you possibly can. If you end up being able to reduce your tax bill, that's OK. The IRS will send you a refund, just as it would if you had overpaid all year through withholding from your paychecks. 

Be Sure to Meet the Deadline 

The important thing is getting Form 4868 to the IRS on or before the April tax filing deadline. The IRS charges a late filing penalty, a late payment penalty, and interest on any balances owed if you don't file your return or the extension on time, and if you don't pay on time.

If you file an extension then file your return by the extended deadline in October, you'll avoid the late filing penalty, which is hefty — 5 percent of the taxes you owe for every month your return is late. This jumps to $135 or 100 percent of the taxes you owe, whichever is smaller, when you're 60 days late or more.

So file the extension and pay as much as you can, then go back to the drawing board to make sure you really owe all you think you owe.

How to Pay  

  • The Electronic Federal Tax Payment System, or EFTPS for short, is a web service operated by the Treasury Department for processing federal tax payments. You must set up a profile and enter your bank account information, but then you can make payments for various tax matters including extension payments, estimated taxes or even paying tax balances for previous years. You can schedule a payment in advance and it will be automatically withdrawn from your bank account on the date you designate. 
  • The IRS also offers Direct Pay, a similar web service. If you don't want to open an account as you must do with EFTPS, you can use this one. The site doesn't retain your bank account or personal information, but you'll have to reenter all this data each time you want to make a payment. If you schedule a payment for a date in the future, you can go back in and change or cancel it up to two business days before the date. 
  • You can also send in payments the good, old-fashioned way by mailing a check with the relevant tax form. The IRS has different addresses for payments depending on the nature of the payment and where you live. You can find an extensive list of addresses on the IRS website to help you identify the one you should use. Make sure your check is made out to the "United States Treasury." Some unscrupulous IRS agents have been arrested in past years for stealing checks made out to "IRS" and altering it to "MRS," "MR. S," "J.R.S" or other combinations that can be created out of the IRS letters.

If You Can't Pay in Full 

Consider setting up a monthly payment plan, called an installment agreement, if you can't pay your balance due. This allows you to pay off your balance over time, and you can even decide how much you want to pay per month. The IRS will still charge the late payment penalty as well as interest, and there's a one-time processing fee to set up the plan. You can do it online using the Online Payment Agreement Application on the IRS Web site.

If you can't afford to pay off your tax debt monthly, seek advice from a licensed tax professional to evaluate other ways for resolving your tax debts

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