The IRS accepts a variety of payment methods and payment options so individuals can stay on top of their tax bills. It's easy to rack up more tax debt if you don't make your tax payments to the Internal Revenue Service on time or as instructed because you will be hit with penalties and other fees.
Estimated Tax Payments
April 15 isn't the only day you have to worry about paying your taxes. Technically, taxpayers need to pay taxes as they earn income. Since employers automatically withhold taxes from employee paychecks, most wage earners don't have to send anything extra to the IRS throughout the year. However, if you are self-employed or receive income without tax withholding, you will likely make quarterly estimated tax payments. If your income is high enough and you don't make estimated tax payments, the IRS could charge you an underpayment penalty at the end of the year.
As of 2014, the IRS accepts payments by check, money order, electronic funds transfer, cashier's check, cash, payroll deduction, credit card and debit card. Checks and money orders should by made payable to "United States Treasury." Although you can use debit and credit cards to pay your taxes, you will have to pay an additional fee for the convenience. The IRS doesn't charge taxpayers a fee, but it does require users to use a payment processing service. The exact payment processing rates vary, but you can expect to pay about a $3 flat fee plus extra 2 percent to 3 percent of the transaction balance.
The IRS charges steep interest rates and levies penalties on unpaid tax bills, so it's best to pay your taxes in full by the due date. If you're unable to pay your entire bill, you can ask the IRS for a 60- to 120-day payment extension. You'll still incur some charges, but they will be less than the charges associated with nonpayment. For those that need a longer period of time, the IRS offers long-term installment agreements for tax bills under $25,000. The IRS still charges interest on these plans, so it's best to compare the IRS rate with your other financing options.
If you're far behind on your tax payments, the IRS still offers some relief. If you've had a special hardship, the IRS may offer you interest or penalty abatement. If your financial situation is especially dismal, the IRS may be willing to accept an offer in compromise. If you qualify for an offer in compromise, the IRS will wipe out your entire tax debt as long as you pay a negotiated lump sum. However, if you wait too long to apply for an offer or if the IRS rejects your offer, the IRS could put a federal tax lien on your property. Not only does this give them the right to seize your assets, it also can lower your credit score. You can contact the IRS Taxpayer Advocate Service to see if you qualify for any abatement programs or an offer in compromise.
- Ryan McVay/Photodisc/Getty Images
- How to Fill Out a W-4 if I Want a Tax Refund
- Changing Withholdings at Work After a Baby
- Affects of Being Married on W-4 Tax Withholding
- A Voluntary Withholding Agreement
- IRS Penalties for Underwithholding
- Can the 10% Early Withdrawal Penalty Be Taken From My 401(k) When I Make the Withdrawal?
- How to Withhold Federal Taxes on a Lump Sum Payment
- What Is a W-9 Tax Form?
- Is My Pension Subject to State Taxes?
- IRC 457 Early Withdrawal Guidelines