U.S. taxpayers who end up owing taxes to the IRS have several ways to make payments, and there are options for many people who can’t pay their tax bill in full by the April tax deadline.
The deadline to submit 2021 tax returns or an extension to file and pay tax owed this year falls on April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots’ Day holiday in those states. Some taxpayers who were victims of a natural disaster have even longer to file their returns.
It’s important to file and pay taxes on time to avoid or decrease late filing and interest penalties. Taxpayers should contact a tax professional, like a CPA, if they have questions or concerns regarding filing their taxes.
Sign in to pay and see payment history
Taxpayers can use their Online Account to securely see important information when preparing to file their tax return or following up on balances or notices. Taxpayers can make a same-day payment for a 2021 tax return balance, an extension to file, or estimated taxes, which are all due by April deadline for most taxpayers. They can also view:
- Their Adjusted Gross Income, Economic Impact Payment amounts and advance Child Tax Credit payment amounts needed for their 2021 return,
- Payment history and any scheduled or pending payments,
- Payment plan details and
- Digital copies of select notices from the IRS.
Ways to pay
- Electronic Funds Withdrawal (EFW): This option allows taxpayers to file and pay electronically from their bank account when using tax preparation software or a tax professional. This option is free and only available when electronically filing a tax return.
- Direct Pay: Direct Pay is free and allows taxpayers to securely pay their federal taxes directly from their checking or savings account without any fees or preregistration. Taxpayers can schedule payments up to 365 days in advance. After submitting a payment through Direct Pay, taxpayers will receive immediate confirmation.
- Electronic Federal Tax Payment System: This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll and for more information, taxpayers can call 800-555-4477, or visit eftps.gov.
- Credit card, debit card or digital wallet: Individuals can pay online, by phone or with a mobile device through any of the authorized payment processors. The processor charges a fee. The IRS doesn’t receive any fees for these payments. Authorized card processors and phone numbers are available at IRS.gov/payments.
- Cash: For taxpayers who prefer to pay in cash, the IRS offers a way to pay taxes at one of its Cash Processing Companies at participating retail stores. The IRS urges taxpayers choosing this option to start early because it involves a four-step process. Details, including answers to frequently asked questions, are at IRS.gov/paywithcash.
Check or Money Order: Payments made by check or money order should be made payable to the “United States Treasury.” To help ensure that the payment gets credited promptly, taxpayers should also enclose a Form 1040-V payment voucher and print on the front of the check or money order: “2021 Form 1040”; name; address; daytime phone number; and Social Security number.
File by April 18, 2022 for most taxpayers
The most important thing everyone with a tax bill should do is file a return by the April 18 due date, for most taxpayers (even if they can’t pay in full). Taxpayers may also request a six-month extension to file by October 17, 2022, to avoid penalties and interest for failing to file on time.
Though automatic tax-filing extensions are available to anyone who wants one, these extensions don’t change the payment deadline. It is not an extension to pay. Visit IRS.gov/extensions for details.
Usually anyone who owes tax and waits until after that date to file will be charged a late-filing penalty of 5% per month. So, if a tax return is complete, filing it by April 18 is always less costly, even if the full amount due can’t be paid on time.
IRS Free File is an easy, quick way to file that is available to eligible individuals and families who earned $73,000 or less in 2021. IRS Free File is available on IRS.gov.
Pay what you can
Interest, plus the late-payment penalty, will apply to any payments made after April 18. Making a payment, even a partial payment, will help limit penalty and interest charges. The fastest and easiest way to pay a personal tax bill is with Direct Pay, available only on IRS.gov. For a rundown of other payment options, visit IRS.gov/payments.
The IRS urges taxpayers to first consider other options for payment, including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law. Normally, the late-payment penalty is one-half-of-one percent (0.5%) per month. The interest rate, adjusted quarterly, is currently 3% per year, compounded daily.
If a loan isn’t possible, the IRS can often help.
Online payment plans
Most individual taxpayers qualify to set up an online payment plan with the IRS, and it only takes a few minutes to apply. Applicants are notified immediately if their request is approved. No need to call or write to the IRS. The IRS notes that online payment plans are processed more quickly than requests submitted with electronically-filed tax returns. If a taxpayer just filed their return and knows that they’ll owe a balance, they may be able to set up a payment plan online before they even receive a notice or bill.
There are two main types of online payment plans:
- Short-term payment plan – The payment period is 180 days or less and the total amount owed is less than $100,000 in combined tax, penalties and interest. There’s no fee for setting one up, though interest and the late-payment penalty continue to accrue.
- Long-term payment plan – Payments are made monthly, and the amount owed must be less than $50,000 in combined tax, penalties and interest. If the IRS approves a long-term payment plan, also known as an installment agreement, a setup fee normally applies. But low-income taxpayers may qualify to have the fee waived or reimbursed. In addition, for anyone who filed their return on time, the late-payment penalty rate is cut in half while an installment agreement is in effect. This means that the penalty accrues at the rate of one-quarter-of-one percent (0.25%) per month, instead of the usual one-half-of-one percent (0.5%) per month.
Taxpayers who do not qualify for an online payment agreement may still be able to arrange to pay in installments. See Additional Information on Payment Plans for more information.
Other payment options
Some struggling taxpayers may also consider using these other payment options:
Delayed collection
If the IRS determines a taxpayer is unable to pay, it may delay collection until their financial condition improves. However, the total amount owed will still increase because penalties and interest are charged until paid in full. Taxpayers can request a delay by calling the phone number on their notice or 800-829-1040.
Penalty relief
Some taxpayers qualify to have their late-filing or late-payment penalties reduced or eliminated. This can be done on a case-by-case basis, based on reasonable cause. Alternatively, where a taxpayer has a history of compliance, the IRS can typically provide relief under the First Time Abatement program. Visit IRS.gov/penaltyrelief for details.
Offer in Compromise
Some taxpayers qualify to settle their tax bill for less than the full amount due, through an offer in compromise. Though there is typically a $205 non-refundable application fee, it is generally waived for low-income taxpayers and for offers based on doubt as to liability. The Offer in Compromise Pre-Qualifier tool can help determine eligibility for anyone interested in applying.
The IRS reminds taxpayers that they have rights and protections throughout the collection process. For details, see Taxpayer Bill of Rights and Publication 1, Your Rights as a Taxpayer.
For more information about payments, see Topic No. 202, Tax Payment Options, on IRS.gov.
Taxpayers should know before they owe. The IRS encourages all taxpayers to check their withholding with the IRS Tax Withholding Estimator.
Thanks for reading CPA Practice Advisor!
Subscribe Already registered? Log In
Need more information? Read the FAQs
