So you have prepared your taxes and determined that you have a balance due, what do you do next? A question that we receive a lot in the office is: How can I make the payment for the balance due on my income taxes? What are the options if I can't make a full payment?
The first recommendation when you have a balance due, to either the IRS or a state agency, is to pay that balance by the due date or as soon as possible after that to either avoid or reduce late payment penalty and interest on the balance.
What are available payment options for paying in full?
You can pay by remitting a check or money order payable to the United States Treasury for balances due on your Federal taxes or a check payable to the state taxing authority (for AZ that would be Arizona Department of Revenue). As I joke with some of our clients, paying via check is starting to go the way of the dodo bird, not very common anymore.
Another alternative is to have the amount debited from your account. This can be done at the time of filing, if requested when electronically filing the tax return. Other options to pay via debit include setting up a debit via IRS' Direct Pay or for AZ it can be done at AZtaxes.gov Make A Payment. After entering information about the payment request, you will be prompted to enter the bank information and schedule the payment date. If you pay via bank debit through these websites, there is no additional charge by the taxing authority.
You can also pay via Debit or Credit card, plus a fee that is added to the balance to be paid. To initiate the payment to the IRS, you can go to IRS webpage Pay by credit or debit card. You can then select the card processor on that webpage. These same processors accept payments for other tax agencies (state income tax, county real estate taxes, etc.). The fees have come down in the last year or two but it will cost an extra almost 2% to pay via credit card. A debit card has a flat fee that is around $3 to process the payment.
If you can't pay the entire balance at one time, there are installment payment options available. The IRS has an online payment agreement request here: Online Payment Agreement Request or you cna file a request via mail on Form 9465. If the balance due is below certain limits (for individuals this amount is $10,000), it is almost assured that you will be approved for the payment agreement. For larger amounts, there may be other documentation, requirements or information to be provided to demonstrate the financial need for the payment plan. For example, the IRS may require direct debit of the payment amount, require detailed financial information with the installment agreement on Form 433-D, and in some instances the IRS may require that a lien be put in place to secure the interests of the United States.
As with all things, each situation can be unique so please contact the office to discuss how your situation may need to be dealt with.
Did you find this information helpful? Please leave a comment if you have more questions or need something clarified.