If You Owe Taxes, Here's How to Pay the IRS

Options If You Can't Pay Your Entire Tax Bill

Person counting cash
••• Tatiana Maramygina / FOAP / Getty Images

You've finished your tax return only to realize that you owe money to 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 is more than the cash you currently have on hand.

First, File an Extension 

Don't take that completed tax return and your debt to the IRS at face value, at least not if you prepared it yourself. You can get an automatic extension of six more months to file by submitting Form 4868 to the IRS. This gives you 180 additional days to thoroughly review your return.

Look for deductions you might have missed or miscalculations you might have made. Consult a tax professional now if you did not do so before—you might be eligible for a tax credit or deduction that you are not even aware of. The idea is to reduce your preliminary tax debt if at all possible.

But there's a caveat. Ideally, you should pay your entire tax balance at the time you submit Form 4868 based on what you think you owe. Otherwise, you are likely to accrue interest and penalties on any unpaid balance.

If you do not have the money to pay, remit at least as much as you can. If it ends up that you pay too much—your tax bill is less than you thought it was after you spent some time finalizing your return—the IRS will send you a refund just as it would if you had overpaid all year through withholding from your paychecks.

Meet the Deadline 

The important thing is getting Form 4868 to the IRS on or before the tax filing deadline, which is Tuesday, April 17 in 2019. The IRS charges a late filing penalty, a late payment penalty, and interest on any unpaid balances owed if you do not file your return or the extension on time and if you fail to pay on time.

If you file an extension then file your return by the extended deadline in October, you will 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 $205 or 100 percent of the taxes you owe, whichever is less when you are 60 days late or more. So file the extension and pay as much as you can, and then go back to the drawing board to make sure you really owe all that you think you owe.

The Electronic Federal Tax Payment System

The Electronic Federal Tax Payment System (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 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.

IRS Direct Pay 

The IRS also offers Direct Pay, a similar web service. The site does not retain your bank account or personal information so you will have to re-enter 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.

U.S. Postal Service 

You can also send your money to the IRS the good, old-fashioned way—just mail a check. The IRS has different addresses for payments depending on the nature of the payment and where you live. You can find a list of addresses on the IRS website to help you identify the one you should use.

Setting Up a Payment Plan If You Cannot Pay All at Once

Don't worry if you can't pay all or even anything in April. The IRS offers payment options. The important thing is that you don't just ignore your plight, hoping it will go away because it won't. 

You can set up a monthly payment plan with the IRS called an installment agreement if you cannot pay some or all of your balance. This allows you to pay it off over time. You can even decide how much you want to pay per month, at least to an extent. The balance has to be paid off within 72 months, so your minimum payment would be what you owe divided by 72, then leave some room for interest and penalties.

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 do not have to qualify for the installment agreement by submitting a collection information statement to prove your assets and creditworthiness, at least if you owe less than $50,000. These rules were in place until September 30, 2018, but it is not clear if they have been extended beyond then. You can apply online using the Online Payment Agreement Application on the IRS website.

Other Options 

Depending on how much you owe and your credit, you might want to look into private loan options if you cannot pay by the April tax deadline. You might be able to get a personal loan at an interest rate that's less than the penalties combined with interest that the IRS would assess. This way, you can pay your tax debt and avoid any payment plan with the IRS.

If you cannot afford to pay off your tax debt monthly, or if you owe more than $50,000, seek advice from a licensed tax professional to evaluate other ways to resolve your tax debts. The IRS also considers offers in compromise where it might be willing to accept an amount that is less than what you owe under some circumstances, or it might defer payments until such time as you get back on your financial feet.