Nobody likes paying taxes, but you still have to do it. Here’s the best way to pay if you can pay now, need more time, or owe back taxes.
IRS Payment Options
If you’re able to pay the IRS in full now, you have several options available.
- Mail a check: You can mail a check to the IRS, and it will count as received on the postmark date. (So you can mail it on the day of the deadline as long as you beat the last mail collection time for that day.) Write your Social Security or Tax Identification Number on the check along with the year and form you are paying. Check the instructions for the form for the correct address, as it varies by form and your location.
- Pay online via bank account: You can pay via bank debit directly on the IRS website. There are no transaction fees. Payments count when made, but the system is not guaranteed to be online 24/7, and the IRS offers no extensions when it isn’t.
- Pay via debit card: You can pay with a debit card through one of the IRS’s partners. There is a convenience charge of $2 to $3.95 depending on the partner and amount you’re paying. Some debit cards improperly code as credit cards and try to charge the higher credit card fee, so be sure to double-check the fee when you complete the payment.
- Pay via credit card: You can pay with a credit card through the same IRS partners as debit cards. Credit card fees are about 2% with a $2-3 minimum. You may wish to use a credit card if you need more time to pay, can earn more credit card rewards than the fee, or need to meet minimum spending for a signup bonus.
- Pay with digital wallet: You can use PayPal, Android Pay, Samsung Pay, VISA Checkout, or Masterpass in the same way as a debit or credit card.
Should You Still File Your Tax Return if You Can’t Pay Your Taxes?
If you can’t pay your current taxes, filing your tax return anyway will reduce the late payment penalties you pay.
What are the reasons you may not be able to pay your taxes?
There are several reasons you may not be able to pay your taxes this tax season. These include the following:
- Incorrect withholding at your W-2 job
- Failing to pay estimated taxes on business, self-employment, or investment income
- Penalties for early IRA or 401(k) withdrawals if you lost income or had unexpected expenses
- Ineligibility for expected tax credits or deductions
How would you know you can’t pay your taxes if you haven’t filed?
You may have used a tax calculator to estimate what you will owe. You may also have income that you haven’t paid any taxes at all on.
Should you file your tax return if you can’t pay what you owe?
Yes, you should always file your tax return once you’re sure it’s accurate. Your payment is due on the due date of your return not when you file. Not filing doesn’t give you extra time to pay. Filing early doesn’t mean you have to pay sooner.
So if you’re an individual filer who files in January, you still have until April 15th to send in your payment. Similarly, if you file late, you’ll get charged interest and penalties based on the return due date not the date you filed.
The most important thing to understand is that there are additional penalties for filing late. You’ll pay extra penalties if you can’t pay on time and don’t file until you can pay.
Should you make a partial payment?
Yes, you should always pay as much as you can. IRS interest and penalties are based on the current amount you owe not your total taxes for the year. Just like a credit card balance, you can save interest by making partial payments when you’re able to rather than waiting until you can pay off the entire amount.
Are there other ways to pay?
The IRS accepts credit cards. Once you pay with your card, the IRS considers your taxes paid in full. It doesn’t matter if you haven’t paid the credit card company off yet, since that’s between you and the credit card company. If you get a good promotional offer with a low interest rate, paying with a credit card may even be cheaper than other options.
You may also be able to sign up for a payment plan (installment agreement) directly with the IRS. The major downside is that interest and late payment penalties still apply on your outstanding balance. There is also a setup fee. Finally, if you miss a payment or pay other taxes late, you may go into default on your installment agreement.
Can you request an extension?
Generally, the IRS only allows extensions of time to file but not to pay. Even if you get more time to file your tax return, you still need to pay by the original due date. For example, if you request the automatic extension to file by October 15th, you still need to pay by April 15th.
Occasionally, the IRS will extend payment deadlines for groups of taxpayers such as those in federally-declared disaster areas such as hurricanes.
What if You Owe Back Taxes?
If you owe back taxes, you have a few options. If you can pay what you owe now, pay the same way as a normal tax payment noting on the payment what tax year it’s for. If you can’t pay, the IRS has several alternatives to allow you to get caught up on your taxes and avoid more serious collections actions.
Paying IRS Back Taxes in Full
If you know that the amount you owe is correct or it’s so small that it’s not worth the trouble of disputing, you can agree to the amount owed and pay in full.
An IRS notice will include a full payoff amount including interest and penalties. If you’re paying back taxes on unreported income, pay the amount you calculated on your tax return, and the IRS will bill you for any remaining interest or penalties.
You should also check your eligibility for penalty relief. Depending on why you owe IRS back taxes, you may be able to have the penalties reduced or removed.
Make Alternative Payment Arrangements
If you don’t dispute the amount of back taxes but can’t afford to pay, you have three options.
- Installment agreements are payment plans that pay your taxes in full over time. Interest and penalties apply to your outstanding balance, but the failure to pay penalty is cut in half when you’re using automatic payments.
- An offer in compromise is a payment for less than the total amount you owe to satisfy the debt. To qualify, there must be little chance that you’ll ever be able to pay your tax debt in full. Examples of qualifying individuals include elderly people on fixed income and people who have suffered a permanent disability.
- Currently not collectible status means that you can’t pay the IRS right now but should be able to in the future. Penalties and interest still accrue, but the IRS will often pause more drastic collections measures. Common situations where you may be approved for currently not collectible status include losing your job or suffering a serious illness.
Dispute the Amount Owed
Most taxpayers should at least consider disputing any IRS notice they receive. You may challenge either that you owe back taxes at all or the amount the IRS says you owe.
For example, the IRS notice may be based on a clerical error that resulted in the IRS not correctly calculating what you owe. The IRS computer might not match up the W-2 it got from your employer to the copy you provided and think both W-2s are separate income. You may also have income double reported on 1099-MISC and 1099-K or incorrectly entered W-2s or 1099s.
Additionally, even if you did fail to report income, you may be able to claim deductions against that income that you didn’t previously claim.
Can You Go to Jail for Back Taxes?
Simply not paying your taxes is generally not a crime. You typically only risk facing criminal charges if you try to evade taxes. Financial hardship in one year or a mistake on your tax return is generally not a criminal offense.
However, you still want to make payment arrangements as quickly as possible to stop the IRS from filing a tax lien or taking other collection actions.
If you have any doubts as to whether you can face criminal charges for back taxes, talk to a tax attorney.
As a reminder, you should always make your electronic payments by going to IRS.gov and clicking Make a Payment. The IRS will never ask you to give credit or debit card information over the phone. The IRS will never ask you to purchase a prepaid debit card and read the number over the phone or mail it.