Paying Taxes – The Electronic Way
When it is time to make a tax payment, who would you trust more to get the payment to your account: the United States Postal Services (USPS) or the Internal Revenue Service (IRS)? If you’re like me, my response would be is there a third option?
In the past two years, we have seen various issues with the USPS not delivering items properly or on time. The IRS has not been any better, as they are more behind than ever with truckloads of mail that remain unopened since the pandemic began. Due to all these issues, we are fielding more questions, unnecessary IRS notices, and frustrations all around. The good news is that there are three electronic options to make tax payments that are secure and easy to complete.
The first option, which I personally use and recommend to clients, is the Direct Pay option with the IRS. Go to www.IRS.gov, find the “Make a Payment” button, and select “Pay Now with Direct Pay” on the next screen. This no-fee option will easily guide you through identifying your information and entering your bank information to have the IRS directly debit your account for payment. You can schedule the date you want the payment to be made, and pre-schedule payments for up to one year ahead of time. You also have until 11:45 pm ET to schedule a same day payment. You can change or cancel any of these payments up to two business days prior to the scheduled payment date. You can also choose to pay by credit card or digital wallet, but there is a processing fee for selecting these options.
The second option is setting up a direct debit when we file your tax return. We can set this up for your tax payment due, and any estimated tax payments, by entering your bank information before sending your return to the IRS. The payments will then be automatically scheduled to come out of an account of your choosing on their respective due dates. All you need to do is make sure there are sufficient funds in your account to cover the scheduled payments. There will be a penalty charged if funds are insufficient. There is a way to cancel these payments after signing up for them if needed, due to changing circumstances, bank accounts, or any other reason. At that point, you will need to make your payments another way.
The third and final option is to set up an account with the IRS. This method allows you to see the history of your account, make payments, get transcripts and several other options. Setting up an account with the IRS can also be found on www.IRS.gov. However, it is a tedious process to set up an account and authenticate your identity, but that should only be a one-time issue.
On a related note, we have received information that when scheduling payments for a Married Filing Jointly tax return, you should still use the “primary taxpayer’s” information when entering identity information and scheduling payments. If you use the “spouse” information, there is a chance the IRS will not match up payments with your filed return. We will then have to tell them where to move the payments they have unallocated to the filed return. This simple practice will help avoid headaches in the future.
For more information or help on this or any of your tax needs, don’t hesitate to contact your KTLLP Tax Advisor.