Ready to Pay Taxes? Here Are Your Options
From plastic to direct debits to online tax payments, there are a variety of ways to pay the IRS should you owe tax this year.
Credit Cards and Debit Cards
Save time traveling to the post office and worrying about pesky late fees by paying your taxes with a credit or debit card -- it's fast and convenient. When you have your taxes prepared by H&R Block, you can pay your federal tax at a participating H&R Block office with any Mastercard®, Visa®, American Express® or Discover® credit or debit card with low convenience fees. The convenience fee for paying your federal tax amount with a debit card is a low fixed fee of only $2.58 per transaction.
If you've already filed your tax return (Form 1040 and many other form types) and want to pay taxes online, visit the tax payment site.
The IRS enables taxpayers with SSN's (no ITIN's) an additional method to pay series 1040 taxes directly from their savings or checking account. No prior enrollment is required, but taxpayer identity is verified from information on the prior year tax return. There is no fee for this service – see IRS Direct Pay for more information.
Personal Check or Money Order
If you'd prefer taking the traditional route, paying your taxes with a personal check or money order is the way to go. Just be sure to write 2016 Form 1040, your daytime phone number, and your social security number in the memo field and make your check payable to the United States Treasury. Include a payment voucher with your payment. If you need more info on where to make a payment, head to the IRS website, Where to File.
Can't pay in full by the due date? Don’t worry -- the IRS may allow you to pay in installments. This method of payment must be approved by the IRS. Following approval, the IRS agrees to let you make monthly payments for your debt instead of paying in full. In return, you agree to make timely monthly payments and pay all future tax liabilities. This means you must plan to have adequate future withholding or estimated tax payments so that future tax liabilities are paid in full when you file your returns. If your balance due is not more than $50,000, you can apply online for a payment agreement instead of filing Form 9465.
The IRS virtually guarantees to let you use an installment agreement if you meet the following conditions:
- The amount you owe does not exceed $10,000.
- You've filed all required returns on time and have not had an installment plan in the past 5 years.
- The IRS determines you cannot pay the tax in full when it's due and you furnish the IRS with all the information needed to make this determination.
- You agree to pay the bill within 3 years and comply with the tax laws while the agreement is in effect.
Interest, late payment penalties and a processing fee apply. Here are the fees for setting up an installment agreement:
- $52 for a direct debit agreement;
- $120 for a standard agreement or payroll deduction agreement; or
- $43 if your income is below a certain level.
You may qualify for a short term agreement if your balance is $100,000 or less. There are no set up fees for those who qualify for a short term agreement (120 days or less).
Here's how to apply for an installment agreement:
- Apply online if you owe $50,000 or less in combined individual income tax, penalties and interest;
- Call the phone number on your bill or notice
- Complete and mail Form 9465, Installment Agreement Request (PDF). If you owe more than $50,000, you will also need to complete Form 433-F, Collection Information Statement (PDF).
To limit the amount of penalties and interest, it's a good idea to pay as much of your tax bill as possible with your return. The IRS recommends considering other less costly alternatives, such as a bank loan, before considering an installment agreement.
When you apply online, there are three payment options available:
- Pay in full
- Short-term extension (If you can pay the full amount you owe within 120 days, call 1-800-829-1040 to establish your request to pay in full. If you can do this, you can avoid paying the fee to set up an installment agreement.)
- Monthly payment plan
Which Payment Option is Best for You?
When deciding which payment method works best for you, remember to carefully consider the interest rates and other costs of the payment options. Interest and penalties do not stop with an installment agreement/payment plan. Save money and minimize the interest and penalties you will be charged by paying the full amount you owe, as quickly as possible. Under an IRS installment agreement, in addition to the processing fees, you are charged interest at the current rate (adjusted quarterly) plus a late penalty of 0.5% (0.25% for taxpayers who filed returns on time).
For more information about IRS payment options, visit IRS Payments. If you think you'll have a balance due this year, knowing your options will save you money, time, and stress.