March 27, 2020 · Budget, Credit, Investment, Taxes
This March the Treasury Department and Internal Revenue Service announced that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020; this date change also automatically extends the ability to contribute to Individual Retirement Accounts/Health Savings Accounts for the 2019 tax year to July 15.
Taxpayers can also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax. What many of us may not know is that there are many different methods available for paying those taxes.
For decades, Americans have been used to writing a check and mailing it in with their tax forms, and millions of Americans also pay their taxes by using their tax software. But as the U.S. Internal Revenue Service (IRS) has upgraded and modernized its systems and processes, it has added several additional, more flexible methods of collecting money from taxpayers, and these methods are likely to be both more secure and faster than the U.S. mail. Almost all of these payment methods are electronic, so most of them would require having access to a computer and/or mobile device to benefit from them.
The first electronic payment method for taxes is Electronic Funds Withdrawal. This method enables taxpayers to use a transfer from their bank account when they electronically file their tax return. While Electronic Funds Withdrawal is free, it is only available through the no-cost e-File tax filing service.
A similar method to electronic funds withdrawal is Direct Pay, where funds come from a checking or savings account. The special advantages of IRS Direct Pay are the ability to schedule payments up to a month in advance, receive email notifications of payments, and receive instant confirmations of payments after they’re submitted. You can't make more than two Direct Pay payments in 24 hours and each payment has to be less than $10 million.
The IRS does allow taxpayers to pay their taxes by debit or credit card online, by telephone, or with a mobile device, such as a smartphone or tablet. However, keep in mind that these payments can only take place through a third-party service provider that usually charges a fee, and the amount of these card payment processing fees differ by each service provider. The IRS does not make any money from this service; none of the fees charged by the credit card processors goes to the Internal Revenue Service. Contact numbers for the card payment processing providers may be found here.
You can still pay your taxes with cash, but there is a payment limit on taxes up to $1,000 per day, and there will be a fee for using cash since cash acceptance is managed by a third party. Paying by cash should be available to most people, as the IRS has partnership agreements with thousands of retail locations throughout the country. Taxpayers can visit this IRS site for instructions on how to pay with cash.
The IRS also allows taxpayers to pay with its smartphone app, IRS2Go, which is available in English and Spanish. If you're getting a tax refund, you may use the app to check the status, make a tax payment, find free help preparing your taxes, and receive other types of information and assistance with taxes. The IRS2Go app may be found at the Google® Play store, the Apple® App Store or the Amazon® App Store.
However you pay, generally it's a very good idea to pay the entirety of your taxes with a single payment. While the IRS recommends that everyone pay taxes in full if they can (to avoid interest and penalty charges) that option may not always be available to some people. Fortunately, the IRS has a payment agreement program that allows you to pay taxes in monthly installments. But before you're allowed to apply for a payment agreement, you first must file all required tax returns. After filing your forms, you can apply for an installment agreement with the IRS Online Payment Agreement tool, which also has information about who's eligible for an agreement.
Regardless of whether you're paying all at once or through a series of payments, be certain to pay your taxes on time! Remember that the filing deadline for federal taxes is July 15, 2020, but if you need more time to complete your forms, you can file for an extension before July 15. An extensive list of IRS tax publications and forms may be found here.
Provided for informational purposes only.
Consult your tax advisor and/or the IRS for current filing requirements.