As an American expat, you are required to file taxes each year no matter where in the world you may be. The good news is that there are a number of ways to make tax payments, both online and offline. In this post, we will discuss the different payment options available to you and how to make tax payments online.
Here is a useful list of links to help you satisfy your IRS tax debt online:
EFTPS (Electronic Federal Tax Payment System)
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You must register online to take advantage of this option. After successful registration you are sent a letter which will help you complete your online payment. It generally takes around 10 business days to receive the letter after registering. Registration for EFTPS requires you to have an active checking account, but there is no fee assessed for online payments made.
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Register at www.eftps.gov/eftps/
PAY1040
- This is a popular option for expats with a foreign bank account. Although there is a small charge applied for taking advantage of this option (generally under $4), payments can be made quickly and without having to register.
- To pay using this option, visit www.pay1040.com
Official Payments
- This online payment venue typically charges 2.35% of the total amount paid and a minimum payment of $3.95. You may be able to take advantage of a flat fee of $3.95 if you pay using a Visa debit card.
- You may remit state, local, and educational payments.
- You have the option of paying by phone by calling 1-888-UPAY-TAX (1-888-872-9829).
- Visit www.officialpayments.com/fed
for more information.
Pay USA Tax
- Besides EFTPS, this is the least expensive option. Pay USA Tax charges a flat fee of $3.49 for debit cards and 1.89% of payments made with major credit cards.
- Pay USA Tax accepts overseas payments by a variety of accepted cards (Accel, Discover, Mastercard, NYCE, Pulse, Star, and Visa).
- You may pay by phone at 1-888-9-PAY-TAX (1-888-972-9829).
- Use this payment option by visiting www.payusatax.com.
Direct Pay
- Direct Pay is a free service that allows taxpayers to pay their federal taxes straight from their checking or savings account without having to register or pay any fees. Taxpayers can plan payments up to 365 days ahead of time. Taxpayers will receive quick confirmation after completing a payment through Direct Pay.
For most taxpayers (even if they can't pay in full), the most critical thing they can do is submit a return by the April 18 due date. To avoid interest charges for failing to submit on time, taxpayers can request a six-month extension to file by October 17, 2022.
Automatic tax-filing extensions are available to anybody who requests one, but they do not extend the payment date. It is not a payment extension. A late-filing penalty of 5% per month is usually applied to anyone who owes tax and waits until after that date to file. So, even if the whole amount owed can't be paid on time, submitting a tax return by April 18 is always less expensive.
Individuals and families earning $73,000 or less in 2021 are eligible for the IRS Free File program, which is a simple and quick way to file.
Pay What You Can
Any payments paid after April 18 will be subject to interest and a late-payment penalty. Making a payment, even if it's only a partial payment, will help you avoid paying penalties and interest. Direct Pay is the quickest and easiest way to pay a personal tax obligation.
The IRS advises individuals to examine other payment choices first, such as taking out a loan to cover the amount owed. In many circumstances, borrowing charges are less expensive than the interest and penalties that the IRS is required to impose under federal law. In most cases, the late payment penalty is half a percent (0.5%) every month. The current quarterly adjusted interest rate is 3% per year, compounded daily.
Online Payment Plans
The IRS allows most individual taxpayers to set up an online payment plan, and the process only takes a few minutes. If an applicant's request is approved, they will be notified right away. Online payment plans are approved more rapidly than requests submitted with electronically filed tax returns, according to the IRS. If a taxpayer has just filed their return and anticipates owing a balance, they may be able to set up an online payment plan before receiving a notice or bill.
There are two main types of online payment plans:
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Short-term Payment Plan
The payment period is 180 days or less, and the total amount payable in tax, penalties, and interest is less than $100,000. There is no charge to open one, but interest and a late-payment penalty will continue to accrue.
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Long-term Payment Plan
Payments are made on a monthly basis, and the total tax, penalties, and interest owed must be less than $50,000. A setup fee is usually charged if the IRS authorizes a long-term payment plan, sometimes known as an installment agreement. Low-income taxpayers, on the other hand, may be eligible for a fee waiver or reimbursement.
Furthermore, while an installment arrangement is in force, the late-payment penalty rate is reduced by half for everyone who filed their return on time. This means that the penalty will be calculated at a quarter-of-one percent (0.25%) per month, rather than the typical half-of-one percent (0.5%) per month. Even if a taxpayer does not qualify for an online payment agreement, he or she may be able to set up a payment plan.
Other Payment Options
Some taxpayers who are having financial difficulties may want to investigate the following payment options:
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Delayed Collection
If the IRS believes that a taxpayer is unable to pay, collection may be postponed until the taxpayer's financial situation improves. However, because penalties and interest are imposed until the balance is paid in full, the total amount owed will continue to rise. Taxpayers can request a postponement by calling 800-829-1040 or the phone number on their notice.
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Relief from Penalties
Late-filing or late-payment penalties may be lowered or avoided for some taxpayers. This can be done on a case-by-case basis if there is a good justification. Alternatively, the IRS can usually give relief under the First Time Abatement program if a taxpayer has a history of compliance.
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Offer in Compromise
Some taxpayers qualify to settle their tax bill for less than the full amount due, through an offer in compromise. Though there is typically a $205 non-refundable application fee, it is generally waived for low-income taxpayers and for offers based on doubt as to liability. The Offer in Compromise Pre-Qualifier tool can help determine eligibility for anyone interested in applying.
