Here are your tax payment options if you owe the IRS this year


It is almost two months before tax day and it seems that fewer tax filers will receive a refund this year.

About 30 million Americans will owe money to the IRS for 2018, up $ 3 million from before the introduction of the Employment Tax Reduction and Reduction Act. of Republicans. Many who have already filed their taxes and been struck by a bill have been shocked. Maybe that understands you.

So why suddenly do you need taxes? And what can you do if you can not afford the bill? Here is what you need to know.

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Finding out that you have to pay taxes while thinking about getting a refund is really disappointing. And if you count on this repayment to pay a debt or make up for your bills, it could create an even bigger financial puzzle. But it is important to understand that it is not because you owe more than this April that you paid more taxes in 2018.

The new tax law has made major changes to tax brackets, reducing tax rates for almost every income level and filing status, said Logan Allec, CPA and website creator. Money Done Right savings.

"After the adoption of this new tax law, the IRS and the US Treasury quickly adjusted the payroll deduction tables, which employers use to calculate the amount of taxes to deduct on employees' paycheques," he explained. Since tax rates have been reduced, "changes to source deduction tables have generally had the effect of reducing federal income tax deducted from employees' paycheques at each pay period" .

If you have generally withheld your salary, unless you have updated your W-4 for 2018, you may have ended up underpaying.

It is also possible that your tax payable has increased last year. "Despite its name, the law on reducing taxes and employment certainly has not provided for tax cuts for all Americans," said Allec.

For example, there is now a $ 10,000 deduction limit on local taxes and national taxes. So, if you live in an area where local and state taxes are high, such as property taxes, you have probably lost the ability to deduct part of it. The same is true if you own a house where the value of the property is high because the ceiling for deducting mortgage interest has been lowered.

"Another group affected by the law on reduction and reduction of income tax is constituted by those who pay large corporate expenses not reimbursed," said Allec. Prior to 2018, a taxpayer who split deductions could deduct work-related expenses, such as personal vehicle mileage and travel expenses, if those expenses exceeded 2% of adjusted gross income. "This is no longer the case for the 2018 taxation year."

Although the standard deduction has been significantly increased to offset the loss of many tax deductions, if you previously relied on valuable tax cuts that have now disappeared, you may end up in the red. Combine that with an improper tax deduction, and you could find yourself indebted to a heavy bill in April.

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If you can afford to pay your tax bill on time and in full, this is the best solution. It is important to note that even if your file extension is approved, at least 90% of your tax payment is due on April 15th.

There are several ways to make your payment with the IRS, some of which are free. Other, however, require fees.

  • IRS Direct Pay: One of the easiest ways to pay your taxes is to use the IRS Direct Payment Platform, which deducts your payment directly from your bank account. "Do not forget that to use this option, you must have your 2017 tax return handy. The IRS will use this information to verify that you are good for you, "said Allec.
  • IRS2Go application: Even Uncle Sam has an application available on the Apple App Store, the Google Play Store and Amazon. With the application, you can pay via IRS Direct Pay or by credit or debit card, which is subject to a fee. (More information below.)
  • Digital Portfolio: You can also pay your tax bill via your digital wallet, such as Visa Checkout or Android Pay. A processor, payUSAtax, allows you to pay your taxes from a PayPal account. To do this, go to the credit card payment page on your mobile phone and select the payment process you wish to use (for a fee).
  • Electronic system of payment of federal taxes: EFTPS is the secure system of the Treasury Department to make tax payments. If you wish to pay your taxes through the EFTPS, you must first register for the program. (It's free.) "Do not forget that the registration process involves some mail and can take a week or two from start to finish," said Allec. You can not make payments the same day with this method.
  • Electronic withdrawal of funds: If you have used tax preparation software or hired a tax professional, you can simply provide your bank account information and the IRS will withdraw what you owe. "The IRS does not charge a fee to pay taxes in this way, but check with your bank if any charges are likely to be charged to you," said Allec.
  • Personal check, money order or bank check: Indicate your current address and phone number somewhere on the check or money order. In the memo section, write "2018 Form 1040" and your social security number. Complete Form 1040-V and send it with your payment to the address on page 2 of the Form 1040-V instructions. "Do not forget that even if you pay in this way, your bank may charge you a fee for the preparation of the money order or bank check," said Allec. He recommends sending your payment by certified mail with acknowledgment of receipt, which can cost a few dollars.
  • Bank transfer: If you have to make a payment the same day at the IRS, you can do it with a bank transfer, which will probably require you to go to your bank. "Make sure you fill out the same day worksheet for IRS taxpayers and bring it with you," said Allec. "The IRS does not charge any fees on incoming wire transfers, but your bank may charge you a fee on outgoing transfers."
  • Cash: "There is actually a pretty complex process to pay your tax bill in cash," said Allec. The first step is to register on the Official Payments website. Once the IRS has verified your information, which can take two to three days, you will receive an email with your unique payment code and the location of the retail store where you will complete the transaction . Paying your tax bill in cash is quite expensive, at $ 3.99 per payment, and your payments are limited to $ 1,000 a day.
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    If you can not afford to pay your entire tax bill immediately, do not panic. You are certainly not the only one and you have options.

    Keep in mind that if you have to pay taxes to the IRS and you can not pay in full, it is imperative that you file your tax return on time, said Kathy Pickering, Executive Director of the Institute. H & R Block. This is because late filing will result in heavier penalties than late payment.

    Here's what you can do if you can not afford to pay your taxes in full:

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    If you only need a few months to complete your payment, your best option is probably to request a payment extension. In this case, the IRS will provide up to 120 days to pay the amount.

    Although there is no charge for requesting the extension, the IRS will charge a penalty of 0.5% per month on the outstanding balance, plus interest, said Pickering. "This option is convenient for taxpayers who need little time to pay the full tax. … With short-term extensions, you avoid payment of installment payment fees, but not late fees and interest. "

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    If you need more than 120 days to pay your tax bill, you can set up an installment plan with the IRS. According to Pickering, the type of agreement you may be entitled to depends on your circumstances, including the amount you owe and the time frame in which you can pay the balance.

    For example, if you opt for a long-term payment plan (of a duration greater than 120 days) and accept automatic withdrawals, it will cost you $ 107 to set up by phone, mail or in person . If you apply online, the fees are only $ 31. Low-income taxpayers are required to pay $ 31 regardless of the structure of the plan, although these fees may be waived if certain conditions are met.

    If you choose the long-term plan without automatic payments, these fees rise to $ 225 by phone, mail or in person; $ 149 online; and $ 43 for low-income taxpayers, with some low-income taxpayers being eligible for a $ 43 exemption.

    As part of a payment plan, the penalty on your unpaid balance falls to 0.25% per month. Interest is billed at the short-term federal rate plus 3 percentage points, according to Pickering. Interest may change each quarter.

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    If paying your tax bill causes financial hardship, you may be able to pay less than you owe. This is known as a compromise offer, which the IRS evaluates on a case by case basis.

    In general, the IRS considers the ability to pay, income, expenses and equity of a person's assets when determining eligibility for settlement. To be considered, you must be up-to-date with all the requirements for filing and paying taxes. You can not have bankruptcy proceedings open. The IRS says on its website: "We generally endorse a compromise offer when the amount offered represents the maximum we can expect to recover within a reasonable time."

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    If you want more flexibility in how to pay your tax bill, you can consider charging it with a credit card.

    This can be an expensive option. As mentioned above, all credit card processors approved by the IRS charge fees ranging from 1.87 to 2.35% of the balance due. These convenience fees can be even higher if you make a deposit with a tax return service such as TurboTax or H & R Block.

    Your credit card probably bears double-digit annual interest on the amount owing. Plus, "higher credit card balances could have a negative impact on your credit score, and paying with credit may not be appropriate for people with unmanageable credit card debt," he said. Pickering.

    One way to make this payment option more affordable is to use a 0% billing card temporarily. You can request a 0% account for new customers or ask your current card issuer to lower your rate. Usually, these transactions last between 12 and 18 months, during which you can pay the balance without interest.

    If you are able to do this, paying the credit card processing fee and having a year or more to pay your tax bill (and potentially earning a few reward points) could be a better deal than setting up a plan by the IRS.

  • This article originally appeared on HuffPost.