How to make federal tax payments on the internet
April 8, 2011
© 2011 by Michael Gray, CPA
With our busy schedules, many taxpayers want the convenience of making tax payments online. The tax authorities have worked hard to make online tax payment options available.
The federal and state governments want taxpayers to use these methods because they get the funds faster and can then use the funds to pay expenses or earn interest.
The IRS has a web page devoted to its options for electronic payment, www.irs.gov/e-pay. (California also has Web Pay option links at its home page, www.ftb.ca.gov. Some California taxpayers MUST pay their taxes electronically or be subject to penalties. For other states, look up the "(state name) Department of Revenue" using your search engine.)
Be aware that when you make tax payments using credit cards or debit cards, there is a fairly stiff service charge. (I believe it's about three percent of the amount paid.)
To avoid these charges, look at the other alternatives.
In some cases, you can designate an account for direct withdrawal on an electronically-filed tax form or extension.
The IRS also has a free electronic funds transfer payment system (EFTPS). You can get the details and register at www.eftps.gov. Be aware that it takes about two weeks to get set up on the system so that you can use it, because the IRS sends an initial password by snail mail. From the instructions for federal individual extension Form 4868, it appears you still have to efile or mail paper Form 4868 when you pay using EFTPS, but you don't have to when you use other electronic payment methods.
Business taxpayers are now REQUIRED to make payroll tax payments and most other tax payments using EFTPS or other electronic payment methods or be subject to penalties.
When you use the electronic payment options other than using credit or debit cards, the funds are withdrawn directly from a designated bank account. When you register, you will need the routing number and account number for the account. Your bank can tell you this information if you reference a check or bank statement either in person or on the telephone.
I fought making payments electronically for my business payroll taxes. Once it was set up, I found it fairly straighforward and has eliminated a monthly trip to the bank.
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