IRS Issues Recommendation on How to Pay Taxes on Time, Avoid Penalties

Internal Revenue Service (IRS) building in Washington, on Oct. 16, 2023. Madalina Vasiliu/The Epoch Times

The Internal Revenue Service (IRS) issued a tax guide on Thursday, listing out the various electronic payment options taxpayers can use when paying tax dues on time.

The deadline for filing and paying income taxes for the 2023 tax year is April 15, 2024. Any delay in filing taxes can attract penalties and interest. Taxpayers who find it difficult to file their returns on time can request a six-month extension before April 15. This will avoid penalties and interest charged, giving taxpayers time until Oct. 15 to file. However, taxpayers should pay what they owe by the April 15 deadline.

“Taxpayers who can’t pay the full amount of taxes they owe by April 15 should file and pay what they can to reduce total penalties and interest,” the agency said on March 14 while listing out some of the electronic payment methods that can be used to pay off tax dues.

An IRS Online Account can be used to pay off tax dues as well as view key information including adjusted gross income, payment history, any scheduled or pending payments, payment plan details, and digital copies of select notices from the IRS.

“Taxpayers can also use their Online Account to securely make a same-day payment for an outstanding 2023 tax balance, pay quarterly estimated taxes for the 2024 tax season, or request an extension to file a 2023 return.”

Direct Pay is a free service allowing taxpayers to pay off dues from bank accounts without having to register for an online account. Payments can be scheduled up to 365 days in advance. Taxpayers will receive immediate confirmation once the payment is completed.

IRS2Go is the official IRS mobile app where taxpayers can make tax payments, check their refund status, and find free tax preparation assistance. The app is available in both English and Spanish.

The Electronic Fund Withdrawal (EFW) option can be used by taxpayers to pay taxes while using tax preparation software or employing a tax professional.

The Electronic Federal Tax Payment System is a free tax payment system offered by the U.S. Department of Treasury to pay federal taxes. New enrollments into the system can take up to five business days to process.

The final electronic payment option is to use credit/debit cards or digital wallets. However, this may not be a free service as payment processors can charge fees for the transactions.

Outside of electronic payments, people can also pay taxes via a check/money order or through cash. A check or money order should be made payable to the “United States Treasury.”

Cash payments can be made at any IRS retail partner locations across the United States. There is a limit of $500 per payment. However, there is no daily limit on the number of payments that can be made. Monthly, annual, and other limits are mentioned on the IRS webpage. To locate partner sites that accept cash payments, taxpayers can visit this link.

The April 15 deadline is not applicable to certain victims of natural disasters who have time until Oct. 15 to pay their 2023 tax dues.

Interest and Penalties

When interest is charged on unpaid taxes, it will be calculated from the due date until the date of payment, with interest compounded on a daily basis. The interest rate is determined quarterly and is basically the federal short-term rate plus three percent.

Last month, the IRS announced that an interest rate will be charged at 8 percent per annum for tax underpayments during the calendar quarter beginning April 1, unchanged from the previous quarter.

As for penalties, the agency will charge a failure-to-pay penalty of 0.5 percent per month for the portion of the tax that remains unpaid. This is subject to a maximum penalty of 25 percent.

For failure-to-file, a penalty of 5 percent will be charged per month, up to a maximum of 25 percent. If the filing is more than 60 days late, there is a minimum penalty of $485 or 100 percent of the tax owed, whichever is less.

Taxpayers who are not able to pay their dues in full can pay a part and then choose a variety of payment options to pay off the remaining balance, including getting a loan.

“In many cases, loan costs may be lower than the combination of interest and penalties that the IRS must charge under federal law. Taxpayers should act as quickly as possible and are urged not to wait to respond to a notice: Tax bills accumulate more interest and fees the longer they remain unpaid,” the IRS said.

Most taxpayers qualify for a payment plan, the agency stated. To qualify for a long-term payment plan, the individual should owe less than $50,000 in tax, penalties, and interest. Taxpayers can repay in up to 72 monthly installments. For tax dues greater than $25,000, a direct debit is necessary.

A short-term payment plan is available for taxpayers who owe less than $100,000 in payments. The IRS gives taxpayers an additional 180 days to pay the balance in full.