Owe the IRS money? Consider your tax payment options
When people receive tax bills from the Internal Revenue Service, most want to pay off the balance as quickly as possible. The good news is that the IRS accepts several payment methods, giving consumers more options over how they settle their balance. However, taxpayers should know that not all payment methods are treated alike, and some may be less favorable and more expensive than others. So before individuals contact the IRS with their payment, they should understand the pros and cons of each option.
The first option is to pay the IRS by check or money order. When a tax preparer files an individual's taxes and a bill is generated, it will detail the IRS office to which the payment should be sent. This usually varies based on a taxpayer's location. All check and money order payments should be made out to the "United States Treasury" and sent in before the April 15 deadline to avoid penalties or fees. This method is most cost-expedient for Americans because there are no processing fees or additional expenses associated with check and money order payments.
Those who prefer to keep electronic records of payments may choose to pay their bill via debit or credit card. While the IRS accepts this method, individuals should be aware that processing fees will apply to payments, which can increase the total amount they must spend. The IRS itself does not impose the fee, but the company that is processing the payment might. These fees will vary by service provider. There are five different payment processors consumers can choose from, so individuals should examine their fee structures to find the most affordable.
OfficialPayments.com/fed is the first provider and imposes a $3.95 debit card flat fee or a 2.35 percent fee for credit cards. The credit card fees are typically a percentage of an individual's tax bill. ChoicePay.com/fed charges a flat debit card fee of $3.48 or a 1.88 percent credit card fee. Further, this processor only accepts Visa or MasterCard payments. Pay1040.com charges a $2.99 flat debit card fee or imposes credit card fees of 2.35 percent. Businesstaxpayment.com also charges a flat $2.99 fee for debit card payments and a fee of 2.35 percent for all credit card payments. Lastly, PayUSAtax.com imposes a flat fee of $3.49 for debit cards or 1.89 percent of total tax bills paid via credit cards.
For large tax payments, individuals may want to steer clear of debit and credit cards to avoid paying more than they actually owe. Those taxpayers who are enrolled in installment agreements also have the option of having monthly payments automatically debited from their bank accounts.
Liberty Tax Service (NASDAQ: TAX) has prepared over 2 million tax returns in 2012 alone and has over 4,100 offices in the United States and Canada. As the fastest growing tax franchise ever, Liberty Tax's total revenues grew to $109.1 million last tax season. Liberty Tax stands behinds community enrichment efforts by sponsoring various non-profit organizations and urging their employees and franchisees to give back to their communities.
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