When and How To Pay Your Taxes

The deadline for paying personal income taxes for the 2022 tax year to the IRS is April 18, 2023. Even if you apply for an extension to file your return, you'll need to pay an estimate of the amount you owe in taxes by the April deadline. To file and pay your taxes to the IRS, you can e-file online, pay on the IRS website, or mail in a check.

Let's dig into some other tax deadlines, as well as how you can pay your taxes and what to do if you can't pay by the due date.

When To Pay Your Taxes

Generally, federal tax returns and payments are due April 15, but that date can fluctuate. If the 15th is on a Saturday, Sunday, or legal holiday, the deadline will be shifted later. The IRS begins accepting tax returns in January, and if you are owed a refund, it's to your benefit to file early so you can get the money sooner.

For tax year 2022, the deadline to file and pay your taxes is April 18, 2023.

Penalties for Late Payments and Filing

If you owe money, you may be tempted to wait until the last possible minute. Just don't leave it too long or you'll owe penalties on top of your tax balance. The penalty for paying late is 0.5% for each month the payment is late, up to 25% of the amount that's due. The penalty goes up to 1% 10 days after the government sends you a final notice that it's going to levy or seize your property.

On top of the penalty for late payment, you'll pay interest. The interest rate is set quarterly and is based on the federal short-term rate plus 3%. It compounds daily.

Late filing penalties are even more: 5% of your unpaid taxes every month or part of a month that your return is late, up to 25% of your unpaid taxes. If you're more than 60 days late, there's a minimum penalty of $450 (for your 2022 taxes that you file and pay in 2023) or 100% of the taxes owed, whichever is less.

Requesting an Extension

You can get an automatic extension of time to file your tax return by submitting Form 4868 to the IRS by the tax filing deadline. Although this won't get you out of having to pay your taxes on time, it gives you until mid-October to thoroughly review and double-check your return, or to have someone else do it for you, to find ways to lower the amount you owe.

Look for deductions that you might have missed or any miscalculations you might have made. Consult a tax professional or use trusted tax software if you haven't done so already. You might be eligible for a tax credit or a deduction that you overlooked because you didn't even know it existed.

The goal is to reduce your preliminary tax debt, if at all possible. But there's a caveat here: You're supposed to pay your entire tax balance at the time you submit Form 4868 to ask for an extension, based on what you think you're going to owe according to your original calculations.

Don't worry if you end up overpaying on your tax bill. The IRS will send you a refund. At least remit as much as you can if you don't have enough money on hand to pay the entire balance due. Penalties and interest start to accrue right after the due date.

Options for Paying Your Taxes

You can pay any tax you owe online, send the IRS a paper check, or ask the IRS for a little understanding. You can often work out payment terms if you're really in a financial bind.

The Electronic Federal Tax Payment System

The Electronic Federal Tax Payment System (EFTPS) is a web service operated by the U.S. Treasury Department for processing federal tax payments. You must set up a profile account with your bank account information and wait to receive credentials in the mail, so it's not an option if you're right up against the payment deadline.

But once you're set up, the site saves your account information, so you don't have to keep entering it every time you make a payment. For this reason, EFTPS is particularly good for people who need to pay quarterly estimated taxes, such as those who are self-employed.

You can schedule a payment in advance. It will automatically be withdrawn from your bank account on the date you designate.

Direct Pay

The IRS also offers Direct Pay, a web service that's easier for making quick payments. But this site doesn't retain your bank account or personal information, so you'll have to enter all this data every time you want to make a payment.

You can go back in and change or cancel a payment up to two business days before the pay-on date if you schedule the payment for a date in the future.

Debit or Credit Card, or Digital Wallet

If you want to pay by debit or credit or use PayPal or another digital wallet, you'll have to go through an approved payment processor. There are three, and all three charge processing fees. Fees vary by processor and payment type. You can access the processors through the IRS website.

Check

You can also send your money to the IRS the old-fashioned way: mail a check. The IRS has different addresses for payments depending on the nature of the payment and where you live. You can find a full list of addresses on the IRS website to help you identify which one you should use.

Set Up a Payment Plan

The IRS offers payment plans if you can't pay all or even anything you owe right away. The important thing is that you don't ignore your situation, hoping that it will go away, because it won't.

You can set up a monthly installment agreement with the IRS, allowing you to pay what you owe over time. You can even decide how much you want to pay per month, at least to some extent. The entire balance has to be paid off within 72 months in most cases, so your minimum payment would be what you owe divided by 72. Leave some room for interest and penalties when you're making your calculations.

The IRS will still charge the late-payment penalty as well as interest, but it's reduced to 0.25% a month. There's a one-time setup fee of $130 for a long-term installment plan, which increases to $225 if you don't apply online. But if you do apply online and if you agree to have the monthly payments taken from your bank account by direct debit, this one-time processing fee drops to $31. And the IRS offers a low-income setup fee option of $43 if you qualify. Direct debit is required if you owe more than $25,000.

You don't have to qualify for the installment agreement by submitting a collection information statement to prove your assets and income, at least not if you owe less than $50,000. You can apply online using the Online Payment Agreement Application on the IRS website.

Other Options for Paying Your Taxes

Depending on how much you owe and your credit score, you might want to look into private loan options if you can't pay by the tax deadline. You'll probably pay more in the way of interest. However, this would allow you to pay off your tax debt and avoid a payment plan with the IRS. Use a loan calculator to determine whether this option makes sense for you.

Seek advice from a tax professional to evaluate other ways to resolve your tax debt if you can't afford to pay off your tax debt monthly or if you owe more than $50,000. The IRS also considers offers in compromise. The agency might be willing to accept an amount less than what you owe under certain circumstances. You'll need to file Form 656 and Form 433-A.

Frequently Asked Questions (FAQs)