September 5, 2016

Electronic Payments Options for Tax Payments

Modern technology has simplified the ability to make financial payments. Various online services such as Paypay, Venmo, and numerous others allow for efficient and secure transfers of money. Tax payments are no longer an exception to the electronic payment methods that manage our finances today.

The IRS and most state governments now allow taxpayers to electronically submit payments online. Below is a summary of how you can make your payments while avoiding your checkbook, the bank, and the post office.

Federal Individual Payments: https://www.irs.gov/payments/direct-pay

Direct Pay allows individual taxpayers to make payments directly from their checking or savings accounts without incurring fees. Taxpayers are not required to register; they must simply go to the website listed above, click the “Make a Payment” button, and follow the system’s instructions. The process is quick and easy. The Direct Pay system also allows taxpayers to view past payments, provided their confirmation numbers are on hand.

Other IRS Payments for Individuals & Businesses: https://www.eftps.gov/eftps/

The Electronic Federal Tax Payment System (EFTPS) is an alternative service provided by the US Department of Treasury that allows for payments to be directly deducted from taxpayers checking or savings accounts. Taxpayers enrolling in the EFTPS system will receive a PIN number in the mail after 5-7 business days. As is the case with Direct Pay, taxpayers using the EFTPS will also have access to their payment history.

California Web Pay for Individuals and Businesses: https://www.ftb.ca.gov/online/webpay/index.asp

The Franchise Tax Board uses a system called WebPay for electronic payments which does not require registration. Any taxpayer may log in with her or his social security number and last name. Once the taxpayer has provided this information, he or she may authorize fund withdrawals from checking or savings accounts. Webpay also allows taxpayers to register with the ‘MyFTB’ system. By registering, taxpayers can view payment statuses, cancel payments, and save information for future payments. As with the EFTPS system, after completing the registration, a PIN is mailed to the taxpayer in approximately 10 business days. The taxpayer must use the PIN to log into the system within 21 days after the registration date to activate the account.

It is important to remember that California mandates that once a taxpayer makes a payment electronically, all future payments must also be made electronically. Electronic payments are also required once a taxpayer makes an estimated tax or extension payment in excess of $20,000, or if the total tax liability exceeds $80,000. Penalties apply for not adhering to these rules.

Credit Card Payments

Tax payments made via credit card are not recommended because third party processors charge service fees ranging from 1.89% – 2.35% of the tax payment amount. Unfortunately, credit card reward points are not always offered for tax liability payments. For a list of recommended services, please see the following:

Federal: https://www.irs.gov/uac/pay-taxes-by-credit-or-debit-card

California Individuals: https://www.ftb.ca.gov/online/CCard.shtml

California Businesses: https://www.ftb.ca.gov/online/credit_card_businesses.shtml

We are happy to discuss and provide support for questions you may have regarding electronic tax payments. Please do not hesitate to contact us.