For today’s consumer, going online to take care of financial matters is second nature. We’re used to ordering goods, groceries, food, and even rides from our phones. And we’ve become accustomed to dealing with money in a way that lets us leave the old checkbook and handwritten ledger behind. For the IRS, this is a positive thing. That’s why they switched to a digital tax payment system this year with IRS.gov’s online bill pay portal. Now, you can go to IRS.gov to Pay Federal Taxes Online, view your balance from the previous year, see your IRS Tax Transcript, and even Pay Estimated Taxes Online. That way you can keep ahead of the money you’ll owe by the end of the year.
IRS.gov is the new and improved Internal Revenue Service (IRS) website for all U.S. taxpayers, to pay taxes and submit requests to the IRS for information.
If you’re new to IRS.gov and want to know how to get the most out of the new service, here are a few things you should know.
Pay Federal Taxes Online
For most newcomers to IRS.gov, paying taxes can feel like a long, drawn-out process. Not anymore. With IRS.gov’s online portal, you can Pay Federal Taxes Online in a few easy steps. First:
- Visit IRS.gov. Make sure you use the “.gov” extension to avoid scams. Play it safe by surpassing your search engine and typing ‘IRS.gov’ into your browser bar.
- Once there, click on the tab that says ‘Pay’ on the upper left-hand corner of the screen. You can also click on the tab further down that says ‘Pay My Tax Bill.’
- From here, you’ll be directed to a new portal with a number of options. Here, you’ll be able to create an account, log into a pre-existing account to check your balance or repayment status, and check to see what kind of repayment options are available. For individuals filing with less than $50,000 to pay back in taxes, there is the option to pay through installments, though you will still need to apply. To make your payments, you can choose ‘Direct Pay,’ which will allows you to link your bank account for easy, automatic monthly payments, or you can choose to pay via credit card or debit account.
- Once you’ve accessed your balance, you can figure out the best course of action. If you’re looking to pay through installments over the course of the year, you’ll be guided to a portal that will ask you to register an account and apply for an online payment agreement. If you are requesting for over 120 days, you will need to be approved via the application.
- From here, you can request the repayment plan that works for you by providing required information, and able to sign the necessary paperwork and figure out the best repayment plan for you. You can delay payments for multiple years, however, interest and fees apply.
Word to the Wise: Make sure your tax balance in the IRS portal is the same as what is shown your latest tax return. The IRS’ online balance may be incorrect or may reflect changes you don’t agree with. Ask your tax pro to check on any differences.
After you’re set up with an account and repayment plan online, you’ll be able to sit back and allow your money to be automatically paid back each month. Be sure to budget this amount as a recurring expense. You can also check back periodically to make sure your payments are being processed on time, or to change your payment plan to reflect changes income.
Pay Estimated Taxes Online
Many business owners think they only need to pay federal taxes online once, which is true for annual compliance like the tax return. However, most businesses and self-employed individuals, who will owe over $1,000 in tax are also required to Pay Estimated Taxes Online throughout the year. Penalties for not paying estimated tax are assessed when your tax return is filed. If the IRS sees that you owe over $1,000 at tax time and you didn’t make any estimated payments, you will be assessed a penalty. These usually range between $300 and $1,000 in extra fines, which you can easily save with some organized planning. The deadline for making the last estimated tax payment is January 15, following the tax year.
Estimated taxes are just that: An approximated figure reflecting the money you’re likely to owe for the next tax year. Quickly calculate your income less deductions and apply a 40% tax rate to net income. If that number is less than $1,000, don’t sweat it. If it is, do some more detailed accounting to figure out what you will owe in taxes or connect with a tax pro.
Calculating your income makes it much easier for individuals and businesses to manage their accounting and tax ahead of time and get started on a payment plan that will save them money in fines and interest. It’s also a helpful way for freelancers, business owners, and professionals whose income can change with bonuses to keep track of what’s owed long before it’s too late to change your tax.
Word to the Wise: Too often I get a business or professional after the year is over who wants me to help get their tax down. While we can do this the number of available tools plummets once the year is “closed.” If you want to get on this now, consider a consultation as an investment to save you $1,000’s in taxes.
Once you’ve calculated your tax liability, you can use the below instructions to pay estimated taxes online:
- Go to IRS.gov
- Hover over the ‘Pay’ tab in the upper left-hand corner. Follow the steps above to make a payment, which will bring you to the “Tax Information” tab. In the Reason for Payment drop-down box, indicate “Estimated Taxes.”
- After you’ve completed the form, you’ll be able to set up a payment plan based on the estimated sum owed for the year. In the same way that you can set up direct deposit for taxes owed, you can use your account to direct funds into a payment plan for estimated taxes before officially filing.
Download Your Tax Transcripts
An IRS transcript is a little-known must for all business owners and self-employed taxpayers.
Your yearly IRS Tax Transcript is great to have on hand for future loans, applications for grants or financial aid of any kind, or to prove your income when applying for a health care plan in the new year.
Because there are different types of IRS tax transcripts, you will need to narrow down which one is important for you based on your needs.
- A tax return transcript is your summary for a filed tax return, which includes items accompanied with schedules and forms that were previously filed by you. Changes that the IRS or you made after you have filed the original return won’t be reflected.
- A tax account transcript is a summary of your marital status, the return type you filed, your adjusted gross income, and your taxable income. If applicable, it will also indicate any changes that the IRS or you made after filing your tax return.
- A wage and income transcript shows all the records of income that the IRS has on file for the you and will include any reported W2’s, 1099’s, and 1098’s.
On IRS.gov, downloading your IRS Tax Transcript is easy. All you have to do is:
- Visit IRS.gov.
- Click “Get My Tax Record” on the top right-hand corner
- You’ll be directed to a portal that will allow you to view your IRS Tax Transcript, have your transcript downloaded as a PDF, or get a physical copy of your transcript mailed to your home. Once you’ve registered for an account, you’ll be able to access your IRS Tax Transcript online shortly after.
Even if you don’t feel that you need a copy of your IRS Tax Transcript, having one on hand can help you figure out exactly what you’ve earned and exactly what you’ve paying in taxes from year to year. You can also review to ensure that your social security number was not fraudulently used for work by someone else, which is a method used by scammers to work in the United States. Using this information will help you plan for the future and get more savvy about calculating expenses, taxes, and net income ahead of time. We recommend that all taxpayers request their transcripts every year after January 31, and review for accuracy.
Word to the Wise: Having amounts on your tax return that do not match your IRS transcript is a surefire way to flag an audit or an adjustment to your taxes owed.
Track Your Income and Expenses
When you’re working multiple jobs or getting consistent work as a freelancer, keeping track of your income over the year will become tricky. Even if you’re working a salaried job with your tax already taken out of your paycheck, keeping track of your work expenses and other possible deductions can become difficult over the course of the year. That’s why it’s helpful to use expense tracking and accounting tools to help you track your income and expenses over the year. Quickbooks is the most popular tool we see and Wave Apps is beginning to become our free tool of choice. Find a tool that fits your needs. At a minimum, we recommend tools or a system that allows your to:
- Connect your bank account and organize expenses and income
- Upload receipts
- Catalog travel and business expenses
- Make a notes of all other tax exemptions and events
You can also do this using the cloud (to save receipts) and Google Sheets or Excel. In 2016, we completely tracked our expenses and receipts in Google Drive. Out of that experience, we’ve built tools and workbooks that help you track, measure and get money strong.
By the time you’re ready to file your taxes for the year, all you’ll have to do is share your documents with your tax professional.
Establish a Payment Plan
Deciding which payment plan is right for you will have a lot to do with your individual income for the year. Knowing how much you owe comes first, then you should determine how you’ll be able to pay up front. The IRS does not forgive interest on tax debt and can put a lean on your property or place travel restrictions on your passport for unpaid tax. Anyone can set up a payment plan, and everyone should if they owe a large amount of tax they cannot make a payment on.
With IRS.gov, you’ll be able to stay flexible when it comes to repaying your debt. However, if you’re late with your payments or fail to set up a plan within a month or two of your tax filing, you could be subject to penalties and late fees.
Pay Federal Taxes Online to Avoid Penalties
April 15 is the official deadline to file your taxes. However, you are able to file an extension on IRS.gov. Once you’ve been granted the extension, you’ll be granted a new deadline, which is October 15, however, your taxes must be paid by the original deadline. October 15 is the deadline to file, not pay.
If you don’t meet this deadline, the sum of your debt will be subject to additional penalties, fines and interest..
Even if you have everything in order on time, it’s a good idea to stay aware of the kind of penalties you could face should you fall behind in your payments or fail to establish a repayment plan. On IRS.gov, you’ll be able to log into your account and get a sense of penalties so you can stay on track and avoid being charged for late or missed payments. To learn about penalties:
- Visit IRS.gov.
- Under the ‘Pay’ tab, click the option ‘Penalties.’
- You’ll be directed to a new portal that will explain all the possible charges you’ll be susceptible to should you fail to pay your debt in a timely fashion.
The most important and costly penalties are:
- The Failure-to-File Penalty: This occurs when an individual has not filed taxes for the year. This penalty can also extend to taxes that are not paid in full and that have not been set up to be repaid through an installment plan.
- Late Filing Penalty: This is a fine you’ll accrue if you miss the tax deadline or the extension deadline. This penalty will start at 5% of your total owed sum, and will continue to build for each month you fail to pay or set up a repayment plan. If you’re still late to file after two months of the due date, you’ll be charged either 100% of your tax or a fee of $135, depending on which is the smaller sum.
- The Failure-to-Pay Penalty: If you’ve filed your taxes but have not paid them or set up a plan to repay within a few months, you’ll be subject to an increased fine. This fee will start at ½ to 1% of the total sum owed. This fine will continue to build the longer you fail to pay.
In general, to avoid audits and further investigation by the IRS, we recommend filing and paying all taxes owed on time.
To maintain good standing with the IRS and avoid unnecessary penalties and fees, use IRS.gov to check on your filing status, Pay Federal Taxes Online, determine a payment plan, calculate your earnings, Pay Estimated Taxes Online, and use the tracking tools to keep everything timely and in order.