Posted by UNIVERSAL ACCOUNTING & FINANCIAL SERVICES INC.

IRS Payment Options: Debit, Credit & Several Other Ways to Pay Taxes

IRS Payment Options: Debit, Credit & Several Other Ways to Pay Taxes

In the past, writing a check was the only way to make a payment to the IRS. Now, however, there are many options. Find out how the current options for making an IRS payment work, how much they cost, and some of the pros and cons of each IRS payment method.


IRS Direct Pay

How it works:

  • Log in to the IRS Direct Payment Dashboard.

  • Verify your identity and banking information.

  • Approve an ACH debit from your bank account.

It cost you nothing to use this method


Pros

  • It also works on estimated tax payment, installment contract payments, and amended return payments and tax extensions.

  • It can be done online.

  • Modify or cancel a scheduled IRS payment up to two days before the payment date.

  • Payments can be made on the same day.

  • Payments can be scheduled up to 365 days in advance.

  • You can receive email notifications regarding the payment.


Cons

  • Commercial payments are not allowed.

  • It is not possible to make more than two payments in 24 hours.

  • It takes up to two business days for the payment to exit your account.

  • You cannot pay with an international bank account unless it has a US affiliate.


Electronic Federal Tax Payment System (EFTPS)

How it works: 

  • Log in to the IRS EFTPS website, 

  • Provide your identity and banking information, 

  • Wait for approximately a week for a PIN to arrive in your mail, 

  • Set up a password, 

  • Log back in and authorize an ACH transaction from your bank account.

It cost you nothing to use this method


Pros

  • Modify or cancel a scheduled IRS payment up to two days before the payment date.

  • Payments can be made on the same day.

  • Payments can be scheduled up to a year in advance.

  • This can be done online or over the phone 24 hours a day, 7 days a week.

  • Works for paying all federal taxes, including corporate taxes.

  • You can receive email notifications regarding the payment.


Cons

  • Setup may take longer than with direct payment.

  • Your bank may impose a fee if you make the payment (instead of scheduling the payment on the EFTPS website or over the phone).


Make payment to IRS by same-day wire transfer. 

How it works: A wire transfer helps you move money electronically from one person to another through a bank or non-bank provider.

Cost: It would cost around $25, depending on your institution


Pro

  • Fast money transfer.

Cons

  • Your financial institution decides on the availability, cost, and terms of the transfer.

  • You must first complete the IRS taxpayer spreadsheet and take it to your bank.

  • A separate spreadsheet must be completed for each IRS payment made.

  • The transfer is final once processed.



Make a payment to the IRS with a debit card

How it works: 

  • Log into the website of one of the three independent IRS payment processors

  • Provide the payment amount, card details, and other information. 

  • The processor sends the payment to the IRS.

Cost: It would cost between $2 and $3.95 per payment (charges go to the processor, not the IRS).


Pros

  • It can be done online or over the phone.

  • Works with Visa, Mastercard, Discover, American Express, PayPal, STAR, Pulse, NYCE, and digital wallets for Visa, Mastercard, and American Express (depending on the chosen provider).


Cons

  • Processing fee.

  • Payments generally cannot be reversed.

  • Your information is transmitted to third parties.

  • Payments over $100,000 (one hundred thousand) may require special coordination with the processor.


Make a credit card payment to the IRS

How it works: 

  • Log into one of the three independent IRS payment processors' websites and provide the payment amount, card details, and other information. 

  • The processor sends the payment to the IRS.

Cost: It costs between 1.96% and 1.99% of the payment; minimum fees are between $2.50 and $2.69 (fees go to the processor and not the IRS)


Pros

  • It can be done online or over the phone.

  • Works with Visa, Mastercard, Discover, American Express, PayPal, STAR, Pulse, NYCE, and digital wallets for Visa, Mastercard, and American Express (depending on the chosen provider).


Cons

  • Charges generally void miles or other prizes earned with your credit card.

  • If you carry the balance on your credit card, a high-interest rate may apply.

  • Placing a large amount on your credit card can affect your credit score.

  • Payments generally cannot be reversed.

  • Your information is transmitted to third parties.


Make a payment to the IRS by check, money order, or cashier's check

How it works: 

  • Order one from the US Treasury and send it to the IRS. 

  • Make sure to include the name, address, phone number, social security number (be careful) or employer ID number, tax year to which it is to apply, and the corresponding tax form or notice number.

Cost: postage stamps and/or delivery tracking, plus any commission for obtaining a money order or check


Pros

  • A bank account is not necessary to obtain a payment order.

  • You may not require a bank account to get a cashier's check.

  • Bank orders and checks cannot be returned.

  • Money orders and bank checks are traceable so that you can verify receipt.


Cons

  • You must go to a bank or other supplier to receive a money order or cashier's check.

  • Payment orders are limited to $1,000.

  • You must send the check, payment order, or cashier's check.

  • Payment may take days or weeks to arrive and be sent.

  • Regular checks can be returned if there is not enough money in your account, or you do not have sufficient overdraft protection.


Make a payment to the IRS in cash

How it works: 

  • Go to the IRS PayNearMe website and follow the instructions to make a cash payment to the IRS. 

  • You will receive an email confirming your information, and the IRS will verify your information. 

  • You will receive a second email with a link to a payment code and instructions. 

  • Go to the retail store section in the email, have the clerk scan your code, and then pay the cash.

  • You will receive a receipt and payment confirmation.

Cost: It would cost between $1.50 - $3.99 per payment


Pros

  • Does not require a bank account.

  • It can be cheaper and more convenient than receiving a money order or cashier's check.

  • Available in all 50 states.


Cons

  • You have to look for a participating reseller

  • Payment processing can take two business days.

  • You can only pay $1,000 per day; some retailers also have a limit of $500.

  • Getting the money may require a trip to the bank.

  • It may involve carrying a large amount of money.


Make a payment to the IRS on your mobile phone via IRS2Go.

How it works: IRS2Go is the official mobile application of the IRS. You can use it to make payments through the IRS Direct Pay mobile version for free or with a debit or credit card (for a fee).

Cost: the application is free


Pros

  • Compatible with mobile devices.

  • You can generate access security codes for some online services (instead of sending them by SMS).

  • You can also use the app to find free software and tax assistance.


Cons

  • Only direct payment methods, credit and debit cards are compatible with mobile devices.

  • Using direct payment through the app is free, but paying by debit or credit card still incurs a processing fee.


Make Instalment payments to the IRS.

How it works: If you cannot pay your tax bill in full by the due date, you can get a payment plan from the IRS. There are two types of plans: short term (for those who can pay off the balance in 180 days or less) and long term (for those who need more time).

Cost: It would cost around $0 to $225, depending on the plan you choose, how you signed up, and if you are a low-income taxpayer.


Pros

  • Easily apply online on your own (including by phone, mail, or in-person).

  • Most taxpayers qualify.

  • Plans can be restructured, modified, or restored (at a cost between $10 and $89).

  • Tell the IRS that you are making a payment effort.

  • You can make payments automatically from your account (direct debit).


Cons

  • Penalties and interest accumulate until full payment of the balance.

  • There is a fee to sign up in a long term payment plan, although low-income taxpayers get a discount.

  • You cannot owe more than $100,000 to get a short term plan.

  • You cannot owe more than $50,000 to join a long-term plan.


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