Paying your Taxes in the Time of COVID
The IRS recently issued Fact Sheet 2020-10 to remind taxpayers that they “have a variety of options to consider when paying federal taxes.” Due to the COVID-19 pandemic, the filing deadline and tax payment due date was extended from April 15, 2020, to July 15, 2020. Taxpayers filing Form 1040 series returns must file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, by July 15, 2020, to obtain the automatic extension to October 15, 2020. The extension provides additional time to file the tax return, but it is not an extension to pay any taxes due. The payment of 2019 income taxes, and the payment of 2020 estimated taxes ordinarily due April 15 and June 15 respectively, are now both due July 15, even if a taxpayer obtains an extension to file.
Electronic payment options
The IRS notes that electronic payment options are the optimal way to make tax payments. Individual taxpayers can use Direct Pay for two payments each day. Direct Pay allows taxpayers to pay online directly from a checking or savings account for free, and to schedule payments up to 365 days in advance. Taxpayers will receive an email confirmation of their payments.
For businesses or those making large payments, the IRS recommends using the Electronic Federal Tax Payment System, which allows up to five payments per day. Enrollment is required. Taxpayers can schedule payments up to 365 days in advance and opt to receive email notifications about their payments.
Taxpayers who file electronically can also pay using the tax software online through an electronic funds withdrawal. Taxpayers can instead choose to pay with a credit card, debit card, or digital wallet option through a payment processor.
Paying by check, money order, or cashier’s check
Taxpayers paying a 2019 income tax liability without an accompanying 2019 tax return should include Form 1040-V, Payment Voucher, with the payment when paying by check, money order, or cashier’s check. The form and payment can be mailed to the addresses provided on the IRS website.
Taxpayers making their 2020 estimated tax payments by check, money order, or cashier’s check should include the appropriate Form 1040-ES payment voucher, and indicate on the check memo line that it is for a 2020 estimated tax payment.
Paying by cash
Individuals and businesses who prefer to pay in cash can do so at a participating retail store. There is a $1,000 payment limit per day and $3.99 fee per payment.
Payment options for those who cannot pay in full
For taxpayers who cannot pay in full, the IRS encourages them to pay what they can and consider a variety of payment options available for the remaining balance. Most taxpayers have the following payment options when they cannot pay the entire balance in full:
- Online payment agreement
- Installment agreement
- Temporarily delaying collection
- Offer in compromise
Interest and late-payment penalties will continue to accrue on any unpaid taxes after July 15, 2020.
Review and update tax withholding
The IRS encourages all taxpayers to check their tax withholding for 2020, especially those who made withholding adjustments in 2019 or had a major life change due to the COVID-19 pandemic or any other reason. To help taxpayers allocate the appropriate withholding to their paychecks throughout the year in 2020, an updated version of the agency’s online Tax Withholding Estimator is now available on the IRS website.
Payment deadline
Taxpayers who owe a 2019 income tax liability and estimated taxes for 2020 must make two separate payments on or before July 15, 2020,—one for their 2019 income tax liability, and one for their 2020 estimated tax payments (the two estimated tax payments due July 15, 2020, can be combined into a single payment).
Although the COVID-19 pandemic is still ongoing, payment deadlines will not be extended further. The IRS is reminding taxpayers of the payment options available for those who can and cannot pay in full during this difficult time for many taxpayers.