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Making Payments to the IRS: What Are Your Options?

If you owe a payment to the IRS, there are a number of options available for you to either pay in full or to enroll in a payment plan. Not only is it convenient to understand all of the different payment options at your disposal, but considering the prevalence of online fraud related to IRS impersonators, knowing your options will also help protect you against potential identity theft and making payments in error to scammers posing as IRS agents. While some tax bills are reasonable and thus the payments are straightforward, having the ability to make tax payments in increments through an IRS payment plan is helpful should you owe an amount substantially higher than you had anticipated.

This tax payment option allows taxpayers to schedule a payment at the time of filing if their tax returns are filed electronically. Payment is made through the Electronic Funds Withdrawal on or before the annual April 15 tax filing deadline (this is the case whether you file your return timely or file an extension).

This secure service provided by the IRS offers taxpayers a free and easy way to make payments, allowing taxpayers to pay instantly and/or schedule tax payments in advance directly from their checking or savings accounts. Payments can be made online or through the free IRS app, IRS2Go. Through the Direct Pay option, taxpayers can easily view balances and past payments made. Click here for more on IRS Direct Pay.

This payment option is similar to the IRS Direct Pay service, but taxpayers must enroll in the system—which can take up to 5 business days—and they must receive an EFTPS Inquiry PIN (which is used as an additional form of security). EFTPS offers taxpayers the option to make tax payments via the internet or phone, 24/7. Businesses are generally required to use EFTPS to make their tax payments. Click here for more on the EFTPS system.

Taxpayers can pay with a credit or debit card through an IRS verified payment processor, though a processing fee will likely be charged. The fees vary by service provider and may be tax deductible. Click here for more on credit card payments to the IRS.

While many taxpayers have moved to electronic methods for their tax payments to the IRS, payment by check is still an option utilized by many people. For federal tax payments, the check, money order or cashier’s check should be made payable to the U.S. Treasury. Payments should not be stapled, clipped or attached to the tax form, and you should include your name, address, daytime phone number and Social Security number or Employer Identification Number on the front of the payment (taxpayers should use the SSN shown first if it’s a joint return). Also include the tax year and related tax form or notice number. DO NOT send cash through the mail. For payment instructions related to state and local taxes, refer to the IRS state filing guide. For more on payments by check or money order, click here.

The IRS is aware that some taxpayers are unable to pay their taxes in full immediately upon their due date. The IRS payment plan option allows taxpayers with debt owed less than $50,000 to apply for a plan using its Online Payment Agreement tool. The payment plan agreement allows short-term and long-term monthly payment options, though taxpayers should be aware that fees and accrued interest can apply depending on the specific plan.

This payment option allows taxpayers to request temporary delays of their tax debt collections until their financial situations improve. Taxpayers must be aware that the full debt will still have to be paid including additional penalties and interest until the payment is entirely paid off.

For taxpayers whom the IRS believe are in legitimate financial hardship, Offer in Compromise (OIC) is a program allowing taxpayers to settle their tax debt for less than the amount they originally owed to the IRS. This option requires an application, the processing of which can often be time-consuming and considerably invasive, as the IRS examines circumstances of ability to pay, income, expenses and asset equity.

For more information about the OIC program, including a Pre-Qualifier test to determine whether you meet the IRS requirements for eligibility, click here.

Taxpayers should pay tax bills timely, as penalties and interest begin accruing immediately after the April 15 deadline. If you’re unable to pay in full at the time your tax bill is due, however, one of the above options is worth considering to help you to avoid additional fees and penalties. It’s also important to understand that taxes due are owed by the April 15 filing deadline even if you are filing an extension (it’s an extension to file, not an extension to submit payment).

Here at FF&F, our experienced tax professionals can assist in both educating you on tax payment options and in advanced tax planning to assist you in making informed decisions based on your specific taxpayer scenario. For more information on this topic, or our services, please contact us at info@fffcpas.com or 212-245-5900.

Click here for more information about IRS payment options.

Allie Schettini is a Tax Associate who has been with FF&F for over 2 years. She services high net worth individuals and business entities including partnerships, trusts and nonprofits, although her focus area is large, multinational and multistate corporations.