How to Pay Your Federal Owed Taxes

Each year, the IRS collects payments from millions of money-earning, taxpaying Americans. And while, in days of old, payment had to be completed via check or cash payment, today there are more ways to pay the IRS than just about any money collecting service out there. So if you’d like to explore the best way for you to pay your taxes, you’ve come to the right place.

But before we dive into how to pay the IRS, it’s important to understand why we pay the IRS each year. What are taxes, and why do we pay them?

Paying taxes is considered each American’s civic duty. We pay taxes to the IRS each year based on a percentage of our income. But once it leaves our hands, it can feel a little unclear where exactly it goes. The reality is, that tax money goes to a huge number of different services. For one, our tax dollars pay the salaries of local, state, and federal government officials. They also pay for necessary community resources, such as public schools, fire and rescue services, and government-subsidized programs, allowing them to remain free and available to anyone who needs them. Finally, taxes go towards the little things we don’t often think about, like maintaining our public parks, public roads, and more.

When we talk about “paying our taxes”, we’re referring to the final step of doing your taxes during tax season: the payment. You may find that some years, once you’ve entered all of your tax and income information, you discover that the IRS owes you money, while others you may find out that you owe the IRS. Has that left you stumped? It’s because, as taxpayers, we’re really paying our taxes all year long. For traditional W-2 employees, this is done automatically. A certain amount in taxes is withheld from each paycheck, based on your estimated tax rate. 1099 employees, on the other hand, are expected to make estimated tax payments on a quarterly basis.

During tax season, we submit all of our income information, as well as info about the amount in estimated tax payments we made each year. We then reconcile our estimated payments with our actual total tax cost, based on our total income, deductions, credits, and more. If we overestimated tax payments and overpaid the IRS, we’ll receive a tax return. If we underestimated and didn’t pay enough, we owe the IRS.

2020 Considerations

Due to the Coronavirus pandemic, the American government revised the 2020 tax deadline, pushing it back until July 15th. That meant that all tax information and tax payments were no longer due on April 15th, but 3 months later. This allowed companies extra time to dispense necessary paperwork, like W-2 and 1099 forms, and also gave taxpayers more time to complete and pay their taxes. For those who were still unable to meet the July 15th deadline to complete their taxes, the standard 6-month tax extension was still available. While they were still required to pay their (potentially estimated) tax payment, they had until October 15th to complete and submit the necessary tax paperwork. 

Ways to Pay the IRS

Because the IRS requires anyone who earns money in the United States to pay tax payments, they offer a vast range of methods by which to pay. No matter which method you use to pay the IRS, payment must be sent by the federal tax deadline, April 15th. This goes for both federal and state taxes, each of which must be paid separately. Note that, even if you file an extension, payment must be sent by April 15th. More on that, later!

Automatic Payment

Automatic payment can be completed for free without the use of a debit or credit card via your bank account. IRS Direct Pay is a secure service that allows you to pay directly from your checking or savings account. It can be accessed through any internet-connected device, including a desktop, laptop, or even mobile device through the IRS’s IRS2Go mobile app, available in any app store. Note that, if connected via wifi, you’ll want to be connected through a secure connection, such as your personal home wifi.

DirectPay is available Monday through Saturday between midnight and 11:45 PM Eastern, as well as Sundays from 7 AM to 11:45 PM Eastern. Once you’ve completed your payment via DirectPay, you’ll receive an instant email confirmation with a confirmation number to keep for your records.

If you have ongoing payments to the IRS as a part of a payment plan, DirectPay gives you the option to schedule payments up to 30 days in advance. If you need to make changes to the schedule, you can do so up to 2 business days before the payment is scheduled to process.

Cost: Free |  Processing time: Instant |  Maximum payment: $10 million 

Cash, Check, or Money Order

There are a wealth of new ways to pay your taxes to the IRS, but the classics are still around, too. You can pay your taxes in person via cash, check, or money order. One option for in-person payment is via your local IRS office, also known as the Taxpayer Assistance Center (TAC). Here, you can get help with all sorts of tax needs, including tax payments. 

In-person payment at a Taxpayer Assistance Center can take 5 to 7 business days to process, so you’ll want to give yourself at least a week and a half of time before payment is due. Also, remember that the federal tax deadline is the same for all Americans, so Tax Assistance Centers can be quite busy as the tax deadline approaches. Consider making an appointment ahead of time for prompt service.

Another option for payment via cash is to pay at a participating retail store, for instance, your local convenience store or pharmacy. This service costs $3.99. In order to do so, visit the Official Payments site and use the PayNearMe function listed under “Extras”. Official Payments will confirm your information and verify it with the IRS. This may take 2-3 days. Once you’re verified, PayNearMe will email you a link to your unique payment code as well as information about your payment location which you’ll need to either print or save on your smartphone.

Once you have all the necessary information, you simply need to visit the listed location and present your payment code to the clerk. You’ll then pay the clerk your payment amount, and they’ll give you a receipt for your records. You can give up to $1,000 each day. The payment takes about 2 days to process.

Cost: Free if paying at TAC, $3.99 if paying via PayNearMe |  Processing time: 5-7 business days via TAC, 5 business days via PayNearMe  |  Maximum payment: $100 million via TAC, $1,000 per day via PayNearMe

Debit or Credit Card

If you’re looking to pay your taxes via debit or credit card, you have many different options. Most e-filing services allow you to pay your tax payment upon filing at a small fee. For instance, TurboTax charges a rate of 2.49% to pay via card, while others may charge slightly more or slightly less. There are also a number of payment processors, such as PayUSAtax, who simply handle payments from taxpayers to the IRS. Finally, most, if not all, tax preparation services, such as CPAs and other tax professionals, will also accept credit or debit payments.

The great thing about paying via credit or debit card is that payment is instant. As soon as the payment is authorized by your bank, it is in the IRS’ hands.

Cost: Around 3% of tax payment depending on processor | Processing time: Instant upon bank approval |  Maximum payment: None, though there are special requirements if paying over $100,000 via processor 

Electronic Federal Tax Payment System (EFTPS)

The Electronic Federal Tax Payment System is a long-standing free payment service from the IRS, originally introduced in 1996. It accepts payment via a secure website, using any device that connects to the internet, or via a voice response system that is reachable by phone. It is available 24/7 via phone or website.

In the event that you have ongoing IRS payments, you can schedule those payments up to 365 days in advance via EFTPS.

How to Pay Taxes Via the Electronic Federal Tax Payment System Online

To enroll in online payment via the EFTPS, you’ll need your Taxpayer Identification Number (TIN). If you’re enrolling as an individual, that’s your Social Security Number. If you’re enrolling as a business, that’s your Employer Identification Number. You’ll also need your bank account number (checking or savings) as well as your bank’s routing number. Finally, you’ll need your name and address, exactly as they appear on your tax forms.

You’ll select “Enrollment” from the homepage, navigate to “Business” or “Individual” according to your standing, and then enter the required information. Within 7 business days, you’ll receive your login PIN via mail.

Once you’ve received your PIN, you’ll be able to log in via the homepage. Select “Login” and then “Need a Password”. You’ll then be prompted to enter your TIN and your PIN and verify your banking information. Finally, you can create your password.

Now that you have your account all set up, you’ll navigate once more to the homepage and select “Make a Payment”. Log in using your new login information and follow the instructions to make a payment. Once your payment is submitted, you’ll be sent to the Payment Confirmation page. Don’t forget to make note of your EFT Acknowledgement Number. This is your receipt for your payment. 

Cost: Free |  Processing time: 7 days to enroll, instant payment processing once enrolled | 

Wire Transfer

Depending upon your bank, you may be able to make same-day federal tax payments via wire. In order to do so, you’ll need to complete the Same-day Taxpayer Worksheet for your financial institution. This will provide them with your information and information about your payment. Specifics in terms of cost and cut-off times vary from bank to bank, so be sure to check with yours prior to visiting. 

Cost: Varies by institution |  Processing time: Same-day 

What to Do if You Can’t Pay Your Taxes

If you find yourself unable to pay your taxes, the most important thing to remember is that you still need to file your taxes by the federal tax deadline. This will help minimize any penalties or interest that you may be subject to. Notify the IRS immediately and pay as much of your taxes as you can. Even if it’s only a small percentage, the IRS favors taxpayers who are proactive about their tax payments.

Remember: a tax extension is not an extension to pay your taxes, it’s an extension to file. You’ll still need to pay your taxes by the federal tax deadline, extension or not. If you’re unable to pay your taxes in full, a tax extension is not the right solution for you. 

IRS Payment Plan

One option for those who cannot pay their taxes is a short-term IRS payment plan. This gives taxpayers an additional 120 days to pay their taxes in full. It’s free to set up, but you’ll be subject to interest and penalties until it’s fully paid off, so it’s best to pay as much as possible upfront and pay off the balance in a timely manner. 

IRS Installment Agreement

If you can’t pay in 120 days, another option is to enroll in an IRS long-term payment plan, otherwise known as an IRS installment agreement. Again, you will accrue interest until the balance is paid in full, so it’s in your best interest to pay as much as possible upfront and be prompt with the repayment of the rest. Note that there is a fee for the setup of a long-term installment agreement, but this can be waived for low-income taxpayers. 

Offer in Compromise

If your owed amount is so large that you’ll likely never be able to pay it in full, it’s worth exploring an Offer in Compromise to pay back taxes. An Offer in Compromise gives you the opportunity to negotiate a lower tax payment to settle the full owed amount. For instance, you may be able to negotiate your $5,000 tax debt down to $3,000 via an OIC. To qualify for an OIC, there must be reasonable doubt that the IRS will ever be able to fully collect on your debt, as it would prevent you from being able to afford your basic needs.  

Not Collectible Status

If paying off your full tax debt would leave you unable to meet your basic needs, another option is to temporarily delay collection by being put into not collectible status by the IRS. While this won’t eliminate your tax debt altogether, it will stop the IRS from attempting to collect your tax debt until you’re in a better financial position. Again, you’ll continue to accrue interest and penalties even if you’re temporarily not collectible, so it’s a good idea not to stay there for long.