Do You Owe On Your Taxes? 3 Different IRS Payment Options

Tax Laws for Immigrants

For some people, tax season is an opportunity to get back some of the money that has been withheld from their paycheck throughout the year. However, for many people who either do not withhold enough or have other sources of income which do not incur withholding, they will end up paying the government each spring. This typically includes self-employed individuals, contractors, and small business owners who didn't make quarterly tax payments or underestimated the total amount they owed.

Fortunately, the IRS offers several payment options for Americans who owe taxes but are unable to write a check for the total. If this sounds like your situation, you can help make sure that you choose the best strategy for your needs by understanding the options below.

1. Know Your Deadline to File

Most Americans need to file their tax return or, at minimum, an extension to file their return by the April deadline or they risk incurring a penalty for late filing. The penalty for late filing can greatly exceed the interest for not paying your tax bill in full, so it is always best to file, even if you cannot pay your entire bill.

It's important to note that an extension to file is not an extension to pay. An Application for Automatic Extension of Time to File can be completed online with E-file's software or printed and mailed via the Form 4868. When you submit this online, you will be asked to include your adjusted gross income from your prior year's tax return, so it's helpful to keep this information close at hand when you submit an extension application.

There are a few exceptions to the April deadline. Most American citizens living outside of the United States have until June 15th to file. However, you must fit one of two qualifications to be in this core group:

  • You must live outside of the United States and Puerto Rico, and your main place of business must be outside of the United States as well.
  • You must be in military service outside of the United States

One of the easiest ways to avoid penalties is to file your taxes on time and through the proper channels. Furthermore, you're likely to have better luck being approved for a monthly payment plan by proving that you're filing regularly, in a timely way, and accurately.

2. Apply for an Installment Agreement

If you're unable to pay your taxes by the deadline, you can apply for a monthly payment plan with the IRS. On the front of your taxes, make sure you include Form 9465, the Installment Agreement Request, and explain the monthly amount you plan to pay on your taxes and the date you plan to submit the funds by. Do your best to find a way to pay off this years tax bill by December — or next March at the latest. This way, you won't have multiple years of income taxes piling up.

As you submit your application, keep in mind that you will be charged one of three amounts when setting up a payment plan:

  • $105 is the standard charge for setting up a monthly payment plan.
  • $52 is the charge if you agree to pull the amount directly from your bank account (as opposed to a credit card charge).
  • $43 is an option for qualified lower-income customers — this will be automatically applied if you qualify.

Taxpayers under monthly agreements have to pay interest and also penalty fees if they miss payments. It's possible to apply for a monthly payment plan online, but there are specific requirements for getting approval. In order to meet the required criteria:

  • Individuals must owe less than $50,000 in combined income tax, penalties, and interest.
  • Businesses must owe less than $25,000 in payroll taxes.
  • Both individuals and businesses must have completely filled the current years taxes as well as prior years.

It's possible to apply for a monthly payment plan through the phone or mail if you do not meet these criteria, but the process may be slower than the online option.

3. Consider Making Credit Card Payments

If you need to pay your taxes immediately but don't have the funds in your bank account, it's possible to pay the IRS via credit card. Many people would rather be in debt with their credit card provider than the IRS, and this can be a smart move if you're looking to consolidate your debt.

To pay via credit card, the IRS lists a chart of websites that customers can provide payments through. The chart lists what cards each company accepts and what their fees are. Any over payments will be refunded after the payment is processed. Keep in mind, that the fees for paying with a credit card can add up, so this should really only be utilized if you are unable to pay your entire tax bill by other means.

Utilizing a credit card or installment plan can be costly, this is why paying your entire tax bill by check or money order is typically the preferred option when it comes to taxes. However, these options do provide an additional method to resolve tax debt when paying in full is not an option. No one wants to be indebted to the IRS, but sometimes it can be avoided by knowing what payment options are available to you.

If you need help filing your taxes this year and want to use, you can sign up for a free account here.

Q&A: What if I pay with my refund and it doesn't cover the cost of your software?

If you chose to pay for our tax software using the proceeds of your refund, the refund must go to a third-party financial institution (similar to an escrow service). Once the financial institution receives the tax refund, they will pay for the software and deposit the balance in the customer's account.

Now, if for some reason, the IRS does not process your tax return within the 21 days (as outlined in the Refund Agreement), you can expect an email regarding how to pay for the software that was used to prepare your tax return.

Why did the IRS not process my refund?
This can happen for a variety of reasons. The best place to find more information on this is visit the IRS website or by calling the IRS at 800-829-1040.

What if I do not pay this?
If the IRS and/or your state do not issue your anticipated refund and the financial institution we work with is unable to collect the tax software fees, we do reserve the right to have these fees withdrawn from the accountper the agreement that was signed. You can review the full Refund Agreement by logging into your account and clicking Summary/Print/Refund Agreement.

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