Options to Pay Taxes
Estimate the total amount of tax you may owe before you complete a tax return. The eFile tax tools are free and easy to use.
Even if you do not have enough money to pay, a tax return should be efiled or filed to avoid further penalties for failure to file. Once your tax return is filed, the IRS can assist in finding a solution to the problem.
Regardless of circumstances, you should file or efile your tax return by April 15. You can always file an amendment to your tax return later if you need to add or change something on your tax return. Even if you owe more taxes than you can afford to pay, eFile recommends that you file or efile a tax return by April 15. Not sure on whether to efile a tax return or a tax extension?
A. Tax payment options on efile.com
Once you start and efile your tax return on efile.com you have the following payment options: (Even if you cannot afford to pay all taxes due, pay what you can afford.)
- Direct Bank Payment: Enter your bank information on efile.com and the IRS will transfer directly from your bank account.
- Mail in Check: Mail in your check to the IRS address listed on the 1040 tax form. The mailing address is based on your tax return state residence.
- Pay your Taxes by Credit Card: On efile.com select to pay your taxes by credit card. Credit card tax payments will be processed by Official Payments Corporation: 1-800-2PAYTAX (1-800-272-9829) or http://www.officialpayments.com.
B. Additional ways to resolve tax debts
Taxpayers with a balance due on their return should consider:
- Cash advances on credit cards
- Link2Gov Corporation at 1-888-PAY1040 (1888-729-1040) or http://www.pay1040.com
- Bank loans
- Liquidating savings accounts, savings bonds, stocks, etc.
- Borrowing against 401(k), Life Insurance, etc.
- Using equity in real estate or other assets
For your information, interest is charged on unpaid taxes from Tax Day until the date of payment. The late payment penalty is estimated to be between 4% - 7% of the taxes owed for each month. Interest rates change, so please call 1-800-829-1040 to get detailed information on the rates which the IRS will charge.
C. Tax installment payments
The IRS will help to set up an installment agreement when the situation warrants. Installment payments allow taxpayers to pay the tax debt over time. The IRS will consider whether an offer in compromise is an appropriate solution. Recent IRS announcement on owing taxes.
How to set up an installment agreement
Taxpayers wishing to pay off a tax debt through an installment agreement, and owe $25,000 or less in combined tax, penalties, and interest can use the Online Payment Agreement (OPA).
Three installment payment options:
- Pay in Full: You may agree to pay in full. With this option you will save penalties and interest.
- Short Term Extension: If you cannot pay in full at this time, you may be eligible for a short term extension of time to pay (up to 120 days). There is no fee for an extension to pay. If the IRS grants you an online approval of your request for a short term extension, you will receive written confirmation within 10 days.
- Monthly Payment Plan: If you cannot pay in full within 120 days, you may be eligible to make monthly installment payments. You must have filed all of your tax returns that are due.
A user fee will be added to the amount you owe, as will a fee for plans where the payments are deducted directly from your bank account. For eligible individuals with income at or below certain levels who apply and qualify, the reduced user fee will generally be added to the amount you owe including agreements where payments are deducted directly from your bank account.
If the IRS grants online approval of your request for monthly installments, you will receive written confirmation within 10 days.
If you owe more than $25,000 in combined tax, penalties, and interest you may still qualify for an installment agreement, but you may need to complete a Collection Information Statement, Form 433F.
Learn more about the Online Payment Agreement (OPA).
Make an Online Payment Agreement (OPA).
Tax Tip: Compare Rates! After you have filed your taxes, calculate the interest rates on the taxes you owe. Interest rates are currently low, so see if you can borrow the money at a lower rate than the IRS interest rate.
To learn more about efiling a tax extension please click here: More on tax extensions.
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