Tax Time Guide: Using electronic payment and agreement options for taxpayers who owe can help avoid penalties and interest

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IR-2023-44, March 9, 2023, WASHINGTON ― With the tax deadline approaching, the IRS reminded taxpayers they can avoid late filing and interest penalties by submitting their tax return and any payments due by April 18. For struggling taxpayers who can’t pay by the deadline, the IRS offers several different options to help.

 

The IRS also provides multiple ways for people to file for an extension, get information to help file their tax return and learn about payment options if they have trouble paying by the April 18 deadline.

 

Eligible individuals and families who earned $73,000 or less in 2022 can use IRS Free File, available only on IRS.gov, to electronically file their taxes. All taxpayers, regardless of income, who need more time to file a return can use IRS Free File as an easy and quick way to electronically file for a six-month extension before April 18, 2023. An extension will help to avoid penalties and interest for failing to file on time, and gives taxpayers until Oct. 16, 2023, to file. However, they still must pay what they owe by the April 18 deadline.

Except for eligible victims of recent natural disasters who have until Oct. 16 to make various tax payments, taxpayers who can’t pay the full amount of taxes they owe by April 18 should file and pay what they can to reduce total penalties and interest.

 

There are several ways to make electronic payments, and there are options for a payment plan or agreement.

 

IRS Online Account

An IRS Online Account provides access to important information when preparing to file a tax return, pay a balance or follow up on notices. Taxpayers can view their:

 

• Adjusted Gross Income.
• Payment history and any scheduled or pending payments.
• Payment plan details.
• 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 2022 tax balance, pay quarterly estimated taxes for the 2023 tax season or request an extension to file a 2022 return.

 

Interest and a late payment penalty will apply to any payments made after April 18. Making a payment, even a partial payment, will help limit penalty and interest charges.

 

Other options to pay electronically

Direct Pay, available only on IRS.gov, is the fastest and easiest way to make a one-time payment without signing into an IRS Online Account.

 

• Direct Pay: Direct Pay is free and allows taxpayers to securely pay their federal taxes directly from their checking or savings account without any fees or preregistration. Taxpayers can schedule payments up to 365 days in advance. After submitting a payment through Direct Pay, taxpayers will receive immediate confirmation.

 

• Electronic Funds Withdrawal (EFW): This option allows taxpayers to file and pay electronically from their bank account when using tax preparation software or a tax professional. This option is free and only available when electronically filing a tax return.

 

• Electronic Federal Tax Payment System: This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll and for more information, taxpayers can call 800-555-4477 or visit gov.

 

• Debit or credit card or digital wallet: Individuals can pay online, by phone or with a mobile device through any of the authorized payment processors. The processor charges a fee. The IRS doesn’t receive any fees for these payments. Authorized card processors and phone numbers are available at gov/payments.

 

Other payment options:

 

• Cash: For taxpayers who prefer to pay in cash, the IRS offers a way to pay taxes at one of its Cash Processing Company services. The IRS urges taxpayers choosing this option to start early because it involves a four-step process. Details, including answers to frequently asked questions, are at gov/paywithcash.

 

• Check or money order: Payments made by check or money order should be made payable to the “United States Treasury.” To help ensure that the payment gets credited promptly, taxpayers should also enclose a 2022 Form 1040-V payment voucher and print the following on the front of the check or money order:

 

• “2022 Form 1040”
• Name
• Address
• Daytime phone number
• Social Security number

 

For taxpayers who cannot pay in full

The IRS encourages taxpayers who cannot pay in full to pay what they can and consider a variety of payment options available for the remaining balance including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law. Taxpayers should act as quickly as possible: Tax bills accumulate more interest and fees the longer they remain unpaid. For all payment options, visit IRS.gov/payments.

 

Online self-service payment plans

Most individual taxpayers qualify for a payment plan and can use Online Payment Agreement to set up a payment plan (including an installment agreement) to pay off an outstanding balance over time.

 

Once the online application is completed, the taxpayer receives immediate notification of whether their payment plan has been approved. Taxpayers can setup a plan using the Online Payment Agreement in a matter of minutes. There’s no paperwork and no need to call, write or visit the IRS. Setup fees may apply for some types of plans.

 

Online payment plan options for individual taxpayers include:

 

• Short-term payment plan – The total balance owed is less than $100,000 in combined tax, penalties and interest. Additional time of up to 180 days to pay the balance in full.

 

• Long-term payment plan (installment agreement) – The total balance owed is less than $50,000 in combined tax, penalties and interest. Pay in monthly payments for up to 72 months. Payments may be set up using direct debit (automatic bank withdraw) which eliminates the need to send in a payment each month, saving postage costs, and reducing the chance of default. For balances between $25,000 and $50,000, direct debit is required.

 

Qualified taxpayers with existing payment plans may be able to use the Online Payment Agreement to make changes including revising payment dates, payment amounts or bank information for payments made by direct debit. Go to Online Payment Agreement for more information.

 

Though interest and late-payment penalties continue to accrue on any unpaid taxes after April 18, the failure to pay the tax penalty rate is cut in half while an installment agreement is in effect. Find more information about the costs of payment plans on the IRS’ Additional Information on Payment Plans webpage.

 

Other payment options

Taxpayers struggling to meet their tax obligation may also consider these additional payment options:

 

• Offer in Compromise – Certain taxpayers qualify to settle their tax liabilities for less than the total amount they owe by submitting an Offer in Compromise. To help determine their eligibility, they can use the Offer in Compromise Pre-Qualifier tool. To help taxpayers prepare their own valid Offers in Compromise, the IRS created an Offer in Compromise video playlist – also available in Spanish and Simplified Chinese – that walks them through the necessary paperwork.

 

• Temporary delay of collection – Taxpayers can contact the IRS to request a temporary delay of the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves. Penalties and interest continue to accrue until the full amount is paid.

 

• Other payment plan options – Taxpayers who do not qualify for online self-service should contact the IRS using the phone number or address on their most recent notice for other payment plan options. For individuals and out-of-business sole proprietors who are already working with IRS Campus Collection and who owe $250,000 or less, one available option is to propose a monthly payment that will pay the balance over the length of the Collection Statute (usually 10 years). These payment plans don’t require a financial statement, but they do require a determination for the filing of a Notice of Federal Tax Lien still applies.

 

For more information about payments, see Topic No. 202, Tax Payment Options, on IRS.gov.

 

Taxpayer Rights

The IRS reminds taxpayers that they have rights and protections throughout the collection process. For details, see Taxpayer Bill of Rights and Publication 1, Your Rights as a Taxpayer.

 

Taxpayers should know before they owe. The IRS encourages all taxpayers to check their withholding with the IRS Tax Withholding Estimator.

 

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax.