TAX PAYMENTS
I think it’s safe to say these are unprecedented times, and there has been talk as I write this (and there
may have been changes by the time you read this), but eventually if you owe additional tax on your 2019
tax return, you will have to pay it. Unless the time to pay is extended, you must pay your 2019 tax liability
in full by April 15, 2020 or you will face additional interest and/or penalties on the unpaid balance. I will
talk in a later article about how to get an automatic extension of time to file your 2019 return, but whether
it’s April 15th or some later date, there will be a date by which you must pay in order to avoid penalties or
interest on the unpaid balance.
There are several ways to pay your taxes in today’s world. In addition to the April 15th payment, many
taxpayers are required to make estimated tax payments throughout the year. If you’re a sole practitioner,
partner in a partnership, or shareholder in an S Corporation, and you expect to owe more than $1,000 or
more when you file, you’re generally required to make estimated tax payments.
So how can you pay? Of course, you can mail a check like most folks have done for years, but there are
other options.
One of the easiest ways to pay your balance due, extension payment, or estimated tax payment, is to use
electronic funds withdrawal when you e-file your return, extension or estimate. This option is built into
most tax software and is set up by your tax preparer. If you’ve had a tax refund direct deposited into a
bank account in recent years, think of this as the opposite of direct deposit. There is no charge for this
service.
Another way to pay that is also free is IRS Direct Pay. Most states also have this option, which allows you
to pay electronically directly from your checking or savings account. This method is also safe and easy,
and in most cases, you can set it up so you’re notified by email when payments occur. Please be careful
though. Scam emails are everywhere now, and you should be careful if you get an email about IRS Direct
Pay. The IRS only contacts taxpayers who request this service and you’ll only get confirmation emails. An
email that looks like it’s from the IRS asking you to confirm any Direct Pay information should be
considered a scam and deleted. Direct Pay, and most state direct pay type options, are free.
You have been able to pay with a debit or credit card for many years, but unlike the previous methods, if
you pay using a debit or credit card, you will incur a fee for the service. Paying with a debit card is generally
inexpensive. The IRS partners with payment processors to process the card payments and most debit card
transactions are a flat fee of less than $5, no matter how much your payment is. Credit cards, on the other
hand, are generally charged a fee that increases as the amount of the payment increases. These fees are
around 2% of the transaction, so no matter how much cash back or airline miles you receive for using the
card, you’re better off paying with a different method.
While rare, there are taxpayers that want to pay their taxes with cash, and the IRS has a way for you to
do that. Visit the IRS Official Payments website (officialpayments.com/fed) and you can set up a cash
payment through one of over 7,000 participating PayNearMe sites nationwide. There is a fee for cash
payments and other restrictions apply.
If you need to pay your taxes but can’t pay the balance in full, the IRS, and most states, allow you to set
up a payment agreement online to make monthly payments. There are fees and restrictions, but this is a
much better option than not paying anything. File your return on time to avoid non-filing penalties, which
are generally much more substantial than non-payment or late payment penalties. Set up a payment plan
and pay the full amount due as soon as possible. All these payment options I’ve outlined above work for
making payments in installments.
If you have questions about ways to pay your taxes, please contact our office. As always, I am looking for
article ideas that you would like me to cover. If you have an idea for a future article, or just have a topic
you would like more information on, please send me an email.
At Faw & Associates, we are always available to answer any of your tax or financial planning questions.
You can get more information on this or many other topics at our website – www.fawandassociates.com
or you can contact us directly by calling our office at (336) 838-3080. You can also email me at
jim@fawandassociates.com any time with your question or concern.
We are accepting new clients. Please call our office for an appointment