Paying Your Taxes

The best and easiest way (in my opinion) is to mail a check with a paper-filed return or mail a check with the 1040-V (federal payment coupon) or CA 3582 (state payment coupon) for e-filed returns.  It cost nothing and the canceled check is your proof of payment.  Expect checks to clear the bank 7-10 days after you mail them.

The IRS has set up their own service to accept payments for taxes, but only from checking or savings accounts (they will not accept credit cards). It is called IRS Direct Pay. The link to the new service is here and they do not charge any fees. If you need to use a credit card, go here to officialpayments.com. Keep in mind this site will charge a fee of around 2% for this service. With credit card interest rates around 20% and the IRS charging "only" around 6% on overdue taxes at this time, do the math first and make sure this is your best option.

Setting Up a Payment Plan

The IRS is remarkably patient with folks that have filed but cannot pay their taxes, provided it is not an every-year occurrence. If you cannot pay the full amount due, simply mail in a partial payment. This tells the IRS two things - (1) you want to pay them and (2) you don't have the money. They will mail you an installment agreement (Form 9465). Indicate how much you can pay monthly and send it back. They will charge you $225 (one-time) for the agreement and interest on the overdue amount of about 7% (as of July 2023). Taking an advance on your credit card is probably around 25% so that's not a terrible deal.

It will take the IRS about 6-8 weeks to send you the form 9465. In those eight weeks if you can manage to scrape together what you owe them, send it in and you will no longer need to file the 9465 and they won't charge you for the installment agreement (since it was never done). So this strategy will buy you a little time as well.  So plan on using an installment agreement (9465) only if it will take you more than 4 months to pay the balance due.

You can now set up a payment plan with the IRS entirely online - click here to do so.  I believe the fee to set up a payment plan on-line is $107, so this is currently cheaper than sending in a paper form 9465.

If you complete and installment agreement and then default, they may then garnish your wages or bank accounts. I recommend being conservative in what you put on the Form 9465 - if you can afford $200 per month specify $150 per month. As long as you are on track to pay the debt within 5 years they will accept it either way. Also you can always pay more than the minimum and pay off the debt quicker (and save on interest charges). You can mail them a check every month or specify a direct debit from a bank account.