FS-2005-5, January 2005
Taxpayers can pay taxes electronically by authorizing an e-pay option, such as an electronic funds withdrawal from a checking or savings account or by using a credit card. Taxpayers who will be making more than one estimated tax payment may want to enroll in Electronic Federal Tax Payment System.
E-payments can be used to:
pay taxes owed on a 2004 income tax return.
pay projected tax due when requesting an automatic extension of time to file.
pay quarterly estimated taxes for Tax Year 2005.
make a credit card payment on an active Installment Agreement for past due tax owed for years 1995 and after.
The IRS has entered into partnerships with private industry, including credit card processors and tax preparation software developers, to make these electronic payment options available.
More than 1.75 million people paid their federal taxes by electronic funds withdrawal or credit card during 2004.
Electronic Funds Withdrawal
Electronic funds withdrawal is free and taxpayers decide when the tax payment is scheduled to be withdrawn from their bank account. Electronic funds withdrawal is available only to those who e-file, either by computer or by phone. A taxpayer may file early and, at the same time, schedule the electronic funds withdrawal as late as April 15, 2005.
A 2005 estimated tax payment can be made through electronic funds withdrawal only when filing a 2004 tax return via computer, whether or not there is a balance due on the return. The quarterly estimated tax payment may be the payment due in April, June or September. Only one estimated tax payment can be made through electronic funds withdrawal per year. This payment cannot be made by phone.
In 2004, more than 800,000 taxpayers paid their taxes through electronic funds withdrawal, an increase of 24 percent over the prior year.
Credit Card Payments
Taxpayers can make credit card payments whether they file electronically or file a paper return. Credit card payments can be submitted via the tax software when filing electronically. Credit card payments can also be made over the telephone and by filing on line.
In 2004, more than 950,000 taxpayers paid by credit card, an increase of 70 percent over the prior year.
The IRS does not set or collect any type of fee for credit card payments, but the private sector companies the IRS has authorized to process these payments do charge convenience fees. The tax payment sent to the U.S. Treasury and the convenience fee are listed separately on the cardholder’s credit card statement.
Some tax software developers offer integrated e-file and e-pay combinations for those who choose to use a credit card to pay a balance due. The software accepts both the electronic tax return and the credit card information. Subsequently, the tax return and tax payment data are forwarded to the IRS and the credit card data is forwarded to the payment processor.
For the 2005 filing season, the IRS has awarded contracts to two companies to accept credit card charges from both electronic and paper filers. Each company has its own convenience fee schedule, and each offers both phone and Internet payment services. The two companies are:
Official Payments Corporation, 1-800 2PAY-TAX (1-800-272-9829), 1-877-754-4413 (Customer Service), and
Link2Gov Corporation, 1-888-PAY-1040 (1-888-729-1040), 1-888-658-5465 (Customer Service).
Anyone may use these services to charge taxes to an American Express Card, Discover Card, MasterCard or VISA account. VISA joined the IRS credit card program in March 2002.
Electronic Federal Tax Payment System (EFTPS)
EFTPS is a tax payment system provided free by the U.S. Department of Treasury. Pay federal taxes electronically - on-line or by phone 24/7. Visit www.EFTPS.gov to enroll. Taxpayers can use EFTPS to make ALL your federal tax payments, including income, employment, estimated and excise taxes. To use EFTPS, you must first enroll. To enroll or for more information online visit EFTPS.gov or to receive an enrollment form, call EFTPS Customer Service at 1-800-555-4477.
EFTPS offers taxpayers the convenience and flexibility of making tax payments through the Internet, or by phone. By 8:00 P.M.(ET) at least one business day in advance of due date, you access EFTPS directly to report your tax information. You will instruct EFTPS to move the funds from your account to the Treasury's account for payment of your federal taxes. Funds will not move from your account until the date you indicate. You receive an immediate acknowledgement of your payment instructions, and your bank statement will confirm the payment was made.
Businesses can pay all their federal taxes using EFTPS. Individuals can pay their quarterly 1040ES estimated taxes electronically using EFTPS, and they can make payments weekly, monthly, or quarterly as well as schedule payments for the entire year in advance.
You can initiate your tax payment 24 hours a day, seven days a week. As an added convenience, EFTPS allows taxpayers to schedule tax payments in advance. Businesses can schedule payments up to 120 days in advance of their tax due date, and individuals can schedule payments up to 365 days in advance of their tax due date. EFTPS will automatically make your payments for you on the due date you indicate. Scheduled payments can be changed or cancelled up to 2 business days in advance of the scheduled payment date.