How to Make IRS Payments for Your Taxes
September 26, 2019
It’s 2019, but the IRS won’t accept your Bitcoins, 3-D printed money, or Venmo. When you owe after filing tax returns or have back taxes to deal with, you to have to make IRS payments with actual money, but how?
The IRS ensures there are multiple ways to pay them back. While you can go through the hassle of making an appointment at your local Tax Assistance Center to pay in cold hard cash, there are easier ways to pay up without having to leave the house.
Electronic payments are the most popular and preferred payment method, used for 89 percent of returns in 2018. But if you’re a taxpayer who prefers to pay offline, you’ve got choices, too.
Review these payment options to figure out how to make IRS payments that work for your financial situation.
The 4 Easiest Ways to Make IRS Payments
1. IRS Direct Pay
For making payments to the IRS as an average taxpayer, one simple method is IRS Direct Pay.
IRS Direct Pay can be used for filing individual tax bills or making estimated tax payments directly from your checking or savings account to the IRS. This feature has the added advantage of being free of charge.
To use Direct Pay, you need to have a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN).
While you can use IRS Direct Pay to make an online payment on your regular web browser, you can also use Direct Pay on the IRS2Go app on your mobile device. You can find the free IRS2Go mobile app on Google Play, the App Store, or Amazon.
If you request it, you will get a confirmation notification via email as soon as you make a payment using Direct Pay. The bank account information you provide is not stored in the IRS systems.
Direct Pay does have some limitations. It is only available Monday through Saturday from midnight to 11:45 p.m. ET and Sunday from 7 a.m. to 11:45 p.m. ET.
The system for Direct Pay does not save your information, so you’ll have to re-enter everything if you return to make another payment. You also cannot make more than two payments within a 24-hour period.
2. Electronic Federal Tax Payment System (EFTPS)
Another secure payment method offered by the government is the Electronic Federal Tax Payment System (EFTPS). Both businesses and individual taxpayers can use EFTPS to pay their taxes.
You must have a secure Internet browser with 128-bit encryption to access the EFTPS website. To log on and enroll, you must have the following three items:
- EIN or SSN
- EFTPS Personal Identification Number
- Internet Password
Once you enroll, the EFTPS system will save your information so it’s easier to make payments in the future.
For payroll taxes, businesses must use EFTPS for deposits. Otherwise, you could be penalized.
EFTPS is highly suggested for large payments. Using EFTPS, you can make income tax payments, employment tax payments, and estimated and excise tax payments.
This payment method is free to use, and you’ll receive confirmation emails with every transaction you make. Another similarity to Direct Pay is that you can cancel or edit payments up to two business days before the scheduled payment date.
The site is available 24/7 and can be accessed via computer or smartphone. Additionally, you can schedule payments for up to 365 days in advance.
3. Payment by Check or Money Order
Not a fan of paying online? You can pay via mail with a check, money order, or cashier’s check made payable to the U.S. Treasury.
Make sure to include the following information on your check, money order, or cashier’s check:
- Your name
- Social Security number
- Daytime phone number
- Tax year
- Tax form or tax notice number
You’ll want to send this form of payment along with a completed Form 1040-V. Don’t staple or paperclip the check or money order to this form.
Be sure to mail both the form and payment method to the address that corresponds to your state listed on Form 1040-V.
4. Payment by Credit or Debit Card
To process payments made by debit or credit cards, the IRS uses standard service providers and business/commercial card networks. The three payment processors they use are PayUSATax, Pay1040.com, and Official Payments.
The provider will charge a fee, which varies based on the service provider used. This processing fee may also be tax-deductible depending on your situation. No part of the service fee goes to the IRS.
Keep in mind that you usually can’t cancel payments made by debit or credit card.
Not all tax forms are payable this way and some higher tax debts may require some extra coordination with your provider. However, it’s an easy way to settle your tax debt and gain some quick peace of mind.
What to Do If You Can’t Make Your IRS Payment
If you aren’t able pay the IRS for any reason, you’re not out of options.
You may be able to qualify for an IRS installment agreement. This payment plan would allow you to make regular payments that are more affordable for you than your entire balance at once.
Depending on your circumstances, you also could be eligible for an Offer in Compromise, which could let you settle your tax debt with the IRS for less than you owe.
To figure out what options you qualify for, contact us. One of our tax professionals can help you find the best tax debt relief solution for your situation.
What to Do If You Didn’t Get Your W-2
February 22, 2019
Receiving your W-2 in the mail can be a heads-up for many people that tax season is in full swing. Because you need your W-2 in order to file your taxes every year, it’s a great nudge to get you started on your tax prep checklist. At the end of each tax year, your employer is required to issue your Form W-2, Wage and Tax Statement, which details how much you made and how much income, social security, and Medicare tax were withheld from your pay. By now, your employer should have issued you your W-2, as the deadline for issuing forms to employees was Jan. 31. But what if you didn’t get your W-2?
If you didn’t get your W-2, take the following steps to ensure you receive it in time to file your taxes.
1. Contact your employer.
If you haven’t already, reach out to your employer or former employer and ask them to send your W-2. This should be the fastest way to get your W-2 form. Verify your contact information with them as well to make sure they sent your W-2 to the correct address.
Did your former employer go out of business or move since your employment with them? Still make an effort to reach out. Google is definitely your friend in this situation. Search for your employer online to see if you can find any breadcrumbs to follow and track them down. You can also attempt to send them a note via mail to their previous address, as there may be a forwarding notice with the post office.
2. Call the IRS hotline.
Still no W-2? Then, call the IRS hotline at 800-829-1040. Make sure you are ready to give the following information:
- Your name, SSN, address and phone number.
- Employer’s name, address and phone number.
- Employment dates.
- An estimation of your wages and federal income tax withheld. You can base this off of your last pay stub.
The IRS will contact your employer for you after this call. They’ll send them a Form 4598, Form W-2, 1098 or 1099 Not Received, Incorrect, or Lost. You should receive a copy of the Form 4598 as well, along with a Form 4852, Substitute for Form W–2.
3. Use Form 4852 in place of your W-2.
If your employer still has not issued a W-2 by April 15, file your taxes using Form 4852 in place of your W-2. It is important not to file Form 4852 too early because you could be charged penalties for “improper use.”
Always be sure to file your taxes on time, even if you use Form 4852. If you do not think you will be able to make the April 15 deadline, file for an extension using Form 4868, Application for Automatic Extension of Time to File on or before April 18. Filing late can cause you to incur some serious tax penalties.
4. If you get your W-2 after you’ve filed, amend ASAP.
Picture this: you didn’t get your W-2 in time so you went ahead and filed your taxes with Form 4852. The next day, you open your mailbox to find your missing W-2. Cue the eye rolling.
If you get your W-2 form after you’ve filed your return and the information is different from what you reported, you’ll need to amend your return. Luckily, amending isn’t too difficult. You’ll just need to file Form 1040X, Amended Individual Income Tax Return.
If you find yourself confused at any stage of filing this tax season, check out what our seasoned team of tax experts can do for you!
Gambling Taxes: Report Your Winnings with Form W-2G
August 21, 2018
Lucky you! Maybe you won rolling dice, playing cards or betting on ponies. No matter how you won, you definitely had some cash flow coming in from gambling this year. There’s just one catch: Gambling income (including winnings in a jackpot, race, raffle, or contest) is considered taxable income and must be reported on your tax return. Did you win a car or another noncash prize? Then the fair market value will be taken into account for purposes of reporting and withholding. Gambling taxes can be a little confusing, so let’s clear some things up.
What is Form W-2G and how do I get it?
If a large amount is won in gambling, the organization that is paying the winnings sends Form W-2G, Certain Gambling Winnings, to the winner. This form reports the amount of your winnings to you and the IRS. The payer must send Form W-2G only if the winner receives:
- $1,200 or more in gambling winnings from bingo or slot machines
- $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno
- More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament
- $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager, or
- Any other gambling winnings subject to federal income tax withholding
You’ll also receive a Form W-2G if the payer withholds federal income tax from your winnings.
When the winnings are shared by more than one person, or when the person receiving gambling winnings is not the actual winner, Form 5754, Statement by Person(s) Receiving Gambling Winnings, is used instead of Form W-2G. Typically, the person receiving the winnings must furnish all the information that Form 5754 requires. You won’t send Form 5754 to the IRS. You’ll keep a copy for your records and return the form to the payer for preparation of Form W-2G for each person listed as winners.
Deducting gambling losses
Gambling losses can be deducted by itemizing your losses on line 28 of Schedule A, Form 1040. Just remember, you cannot deduct more than your winnings.
To find out how to claim your gambling winnings or deduct your gambling losses, you may use this 10 minute IRS interview. When using this resource, you will need:
- The amount of your gambling winnings and losses
- Your filing status
- Any information provided to you on Form W-2G
Recordkeeping for gambling taxes
If you receive Form W-2G, pay gambling taxes on your winnings, or deduct your losses, it is important to keep an accurate record of the precise amounts involved. In order to verify the amounts, you will need to keep the receipts, tickets, statements, etc. of each win and loss. It is also helpful to keep a journal or record of your activity. Overall, you want to be able to show your winnings separately from your losses.
Still baffled by gambling taxes? A tax professional can help you figure out the best way to optimize your tax savings when reporting your winnings and filing your taxes.
The Top 5 Ways to Pay IRS Tax Debt in Full
July 20, 2018
Taxes are a sure thing if you live in the U.S. And when you owe Uncle Sam money, it can make a ding on your finances – and everyday life. That’s why if you owe, you must pay IRS tax debt ASAP.
Thankfully, the IRS offers several programs and services that help taxpayers that owe them money. The method you choose will depend on your specific situation with the IRS. Knowing what to do isn’t always easy. First, analyze your situation and organize all of your financial documents. From there, you can determine if one of these payment methods applies to your situation.
The top 5 methods to find a way to pay IRS tax debt:
1. Repay the full tax debt amount
The fastest and most efficient way to repay the debt you owe to the IRS is to pay the complete amount you owe. This is not an option for many who owe the IRS, which is why the IRS provides other programs and services to make paying your debt possible. Speak with a tax professional to see which IRS payment agreements you may qualify for.
2. Sell your assets (before the IRS takes them)
You may have to say goodbye to your yacht or untouchable sports car if you owe the IRS. By selling assets, you can apply the funds to pay IRS tax debt. Do this as soon as possible before the IRS issues a lien. A lien will make it more difficult to sell your property if you wait too long.
3. Withdrawal from your investment accounts
Do you have any investment accounts like a pension or 401k? If so, you could make an early withdrawal to pay off your debt. If you opt for this route, make sure you pay taxes on the withdrawn money or you could owe the IRS all over again.
4. Dip into property equity
Depending on the housing market, it may be difficult to take out a home equity loan or to refinance. If it makes sense for your situation and the market climate, applying home equity funds can be a viable method for paying your tax debt.
5. Use a credit card or bank loans
Using credit cards or bank loans may seem like merely trading one debt for another. However, the interest rate on credit cards and bank loans tend to be less than IRS interest and penalties.
Don’t wait until the letters pile up
When the IRS sends you a notice to demand federal payment, it’s time to kick it into gear. The IRS wants you to fully pay the debt within 10 days of the notification. This is doable via any of the five methods above to repay your tax liability. If you’re unable to use these resources or have a tax debt amount that you know you can’t pay, a tax professional can negotiate with the IRS on your behalf to reach an agreement. Don’t wait until your next notice letter hits the mailbox to pay IRS tax debt in full!
FBAR versus FATCA Form 8938: Reporting Overseas Assets
July 16, 2018
Having assets in a foreign bank account may sound very mysterious and exotic. However, it can lead to lots of confusion practically when it comes to reporting overseas assets to the IRS.
There are many similarities between the Foreign Bank and Financial Accounts Report (FBAR) and IRS Form 8938 (required under the Foreign Account Tax Compliance Act, or FATCA), which has caused even more confusion among taxpayers. There is certain information that you must report on both FBAR and Form 8938. But Form 8938 requires information that isn’t included in an FBAR, like details on other foreign financial assets and income.
Do you have a financial account at a foreign branch of a U.S. financial institution? If so, you do not need to file FATCA Form 8938, but you do need to file an FBAR. If an FFI (Foreign Financial Institution) holds the account, then you need to file both Form 8938 and an FBAR.
Who Needs to File When Reporting Overseas Assets
Resident aliens of U.S. territories and U.S. territory entities must file FBAR, but not Form 8938. Filing Form 8938 is mandatory for those U.S citizens, resident aliens, and certain non-resident aliens that have an interest in certain foreign financial assets and meet the reporting threshold set by the IRS.
The filing threshold for FBAR is $10,000. If the value of your assets during a calendar year reaches $10,000 at any time, you will need to file an FBAR when reporting overseas assets.
Form 8938 has a different filing threshold. The amount of foreign assets for a tax year must be $50,000 on the last day of the tax year or reach $75,000 at any time during the tax year. These thresholds are for those filing separately. Married filing jointly and individuals living abroad have a higher filing threshold.
What You Must Report
For FBAR, you need to report if you have sufficient interest in a financial entity and/or have the authority to control the assets. You’ll need to report the maximum value of financial accounts maintained by a financial institution that is located overseas.
For FATCA Form 8938, you must report if you have any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or assets that need to be reported on your tax return. You’ll need to report the maximum value of certain specified foreign financial assets. These include financial accounts in FIIs and certain other foreign non-account investment assets.
How to Report
You can file FBAR electronically using the BSA E-Filing System. It’s important to know that you never file an FBAR with a tax return. On the other hand, you always file Form 8938 with your income tax return.
If you have any questions about reporting overseas assets, contact us and one of our tax professionals can help you ensure a correct and compliant filing.