The IRS advised those now receiving tax bills because they filed on time but did not pay in full that there are easy options for paying what they owe.
If a tax return was filed but the balance due remains unpaid, the taxpayer will receive a notice in the mail from the IRS. These notices, including the CP14 and CP501, both of which notify taxpayers that they have a balance due, are frequently mailed in June and July.
How to Pay: Taxpayers may pay by electronic funds transfer, credit card, check, money order or cash:
- Taxpayers can use Direct Pay to pay directly from a checking or savings account. This is a free service.
- Taxpayers can take advantage of the Electronic Federal Tax Payment System to pay by phone or online. EFTPS is a free service of the U.S. Department of Treasury.
- Taxpayers may also initiate a debit or credit card payment. The IRS doesn’t charge for this service, but the processing company might. Fees will vary by company.
- Taxpayers may pay by check or money order made payable to the United States Treasury (or U.S. Treasury) either in person or through the mail.
- Taxpayers should not send cash through the mail. They can pay cash at some IRS offices or at a participating PayNearMe location. Some restrictions apply.
Payment Options: Taxpayers unable to pay what they owe should contact the IRS as soon as possible. Several payment options are available, including:
- Online Payment Agreement — Individuals who owe $50,000 or less in combined income tax, penalties and interest or businesses that owe $25,000 or less in payroll tax and have filed all tax returns may qualify for an Online Payment Agreement. Most taxpayers qualify for this option, and an agreement can usually be set up in minutes. Online applications to establish tax payment plans, like online payment agreements and installment agreements, are available Monday-Friday., 6 a.m. to 12:30 a.m.; Saturday., 6 a.m. to 10 p.m.; Sunday, 6 p.m. to midnight.
- Installment Agreement — Installment agreements paid by direct deposit from a bank account or a payroll deduction will help taxpayers avoid default on their agreements. It also reduces the burden of mailing payments and saves postage costs. Taxpayers who don’t qualify for a payment agreement may still pay by installment. Certain fees apply.
- Delaying Collection — If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves.
- Offer in Compromise — Some struggling taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an offer in compromise. To help determine eligibility, use the Offer in Compromise Pre-Qualifier tool.
Taxpayers can consider other options for payment, including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under Federal law.
Even if a taxpayer works out a payment solution with the IRS, the agency may still need to file a Notice of Federal Tax Lien to secure the government’s interest. Federal law requires the lien to establish priority as a creditor in competition with other creditors in certain situations, such as bankruptcy proceedings or sales of real estate. Once the IRS files a lien, it may appear on a taxpayer’s credit report and harm their credit rating. Therefore, it’s important that they work to resolve a tax liability as quickly as possible before lien filing becomes necessary. Once the IRS files a lien, the agency generally cannot issue a Certificate of Release of Federal Tax Lien until the taxpayer pays taxes, penalties, interest and recording fees in full.
Stay current: Taxpayers can take steps now to make sure they don’t fall behind on their taxes in the future.
Employees can increase their tax withholding by filling out a new Form W-4, Employee’s Withholding Allowance Certificate, and giving it to their employer. To have more tax withheld, claim fewer withholding allowances or ask the employer to take out a fixed amount of additional tax each pay period. To help figure the right amount to withhold, use the IRS Withholding Calculator on IRS.gov.
The Tax Cuts and Jobs Act, enacted in December 2017, changed the way tax is calculated for most taxpayers, including those with substantial income not subject to withholding. The TCJA changed the tax rates and brackets, revised business expense deductions, increased the standard deduction, removed personal exemptions, increased the child tax credit and limited or discontinued certain deductions. As a result, many taxpayers may need to raise or lower the amount of tax they pay each quarter through the estimated tax system.
The newly revised estimated tax package, Form 1040-ES, now available on IRS.gov, is designed to help taxpayers figure these payments correctly. The package includes a rundown of key tax changes, income tax rate schedules for 2018 and a worksheet for figuring the right amount to pay.
For more information, see Publication 505, Tax Withholding and Estimated Tax.