taxes

Paying the Piper

If you owe the IRS, there are several ways to settle your bill.

We talk a lot about the 100 million or so Americans who get tax refunds every spring, admonishing you to adjust your payroll withholding so that less is taken out of your paychecks every payday.

But what about the 35 million or so who actually have to pay extra tax with their returns? If you're among that minority, how should you handle things?

You could, of course, pay the old fashioned way by writing a check. If you do, make it out to the U.S. Treasury. Congress decided a few years ago that because so many folks think IRS is a dirty word, you shouldn't have to write it on your checks. (Also, it's easy for a crook to change IRS to MRS and add a name to make it look like the check is made out to a married woman.) If you send a check, the IRS would like you to include a 1040-V form to help the agency process your payment more efficiently.

If you are among the growing army of taxpayers who file electronically, you have the option of simply telling the IRS to dip into your bank account for the amount due. If you choose the direct debit option, you can file as soon as your return is done and tell the government not to take the money until April 15. That's not quite as much "float" as if you drop the check in the mail at the midnight deadline, but the convenience should count for something.

Another choice is available whether you file electronically or on paper: You can charge your bill to a credit card. We think this is usually a bad idea because you have to pay a "convenience fee" to pay your taxes. We bet you're paying enough already. If you owe more than you can afford to pay, you should consider using the IRS installment plan. More about that later.

Most Popular

2 Credit Card Gotchas to Watch Out For
credit cards

2 Credit Card Gotchas to Watch Out For

After an infuriating wake-up call with her own credit card company, one financial services consultant wants consumers to know something: It’s smart to…
October 20, 2020
Election 2020: Joe Biden's Tax Plans
taxes

Election 2020: Joe Biden's Tax Plans

With the economy in trouble, tax policy takes on added importance in the 2020 presidential election. So, let's take a look at what Joe Biden has said …
October 15, 2020
When Retirees Question More Retirement Income
annuities

When Retirees Question More Retirement Income

What would you say if I told you that you could safely get significantly more retirement income from your retirement savings? That’s what I call an In…
October 20, 2020

Recommended

States With Scary Death Taxes
inheritance

States With Scary Death Taxes

Federal estate taxes are no longer a problem for all but the extremely wealthy, but several states have their own estates taxes and inheritances taxes…
October 19, 2020
Most-Overlooked Tax Breaks for the Newly Divorced
tax deductions

Most-Overlooked Tax Breaks for the Newly Divorced

Filing taxes after a divorce can add yet another problem to an already long list of challenges. But here are some tips to make your return to single l…
September 18, 2020
When Are 2020 Estimated Tax Payments Due?
tax deadline

When Are 2020 Estimated Tax Payments Due?

If you're self-employed or don't have taxes withheld from other sources of taxable income, it's up to you to periodically pay the IRS by making estima…
September 11, 2020
How to Create Income for Life
Financial Planning

How to Create Income for Life

Having a paycheck you can depend on in retirement is more important than ever.
August 26, 2020