If you've ever thought, “School should teach us how to pay taxes,” this guide is for you. We'll walk you through everything you need to know about when and how to pay your taxes—so tax season doesn't become your adult version of the boogeyman.
You might have questions like, “What if I owe money on taxes? When is it due?” or “When do I pay taxes?” or even “How to pay your taxes?” But this ends today. Below, you'll find answers for all these common questions (and more).
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Taxes 101: Understanding your tax responsibilities
Before diving into the specifics of tax payments, let's go over some tax responsibility basics. Knowing when to pay taxes, what types of taxes apply to you, and the specific deadlines can help you avoid penalties and stay on top of your financial obligations.
How much do you have to make to pay taxes?
The IRS mandates that individuals file tax returns if their income exceeds certain thresholds. For 2024, the standard deduction for single filers is $12,550, meaning if your annual income exceeds this amount, you're required to file a tax return. Even if your income is below this threshold, it might still be in your best interest to file if you're eligible for tax credits or refunds.
Types of taxes
There are several types of taxes you might be responsible for, depending on your income and employment status:
- Federal income tax: The main tax most individuals pay, based on their income and filing status.
- State income tax: Many states also levy income taxes, which vary by state and may have different filing requirements and rates. (As of July 2024, the following states do not collect state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.)
- Self-employment tax: If you're self-employed, you're responsible for paying both the employer and employee portions of Social Security and Medicare taxes.
Important tax dates
Understanding key tax deadlines ensures you file and pay on time, avoiding penalties and interest charges:
- Income tax return due date: For most taxpayers, the deadline to file federal income taxes is April 15th each year. If this date falls on a weekend or holiday, the deadline shifts to the next business day.
- Payment due date: Taxes owed are due by the income tax filing deadline. Failure to pay on time may result in penalties and interest.
- Estimated tax payments: If you're self-employed or earn income not subject to withholding, you may need to make quarterly estimated tax payments. These are due April 15th, June 15th, September 15th, and January 15th of the following year.
When do you owe taxes instead of getting a refund?
Receiving a tax refund can feel like a financial windfall, but you might find yourself owing taxes instead. Understanding the factors that lead to owing taxes rather than getting a refund can help you better manage your finances and avoid surprises during tax season.
Income and withholding
One of the primary reasons you might owe taxes is your income level and how much was withheld from your paychecks throughout the year. Employers withhold a portion of your income for federal taxes based on the information you provide on your Form W-4. If you claim too many allowances or underreport your income, not enough tax will be withheld, leading to a tax bill when you file your return.
Self-employment income
If you're self-employed, you're responsible for paying both the employer and employee portions of Social Security and Medicare taxes, as well as federal and state income taxes. Unlike traditional employees, self-employed individuals do not have taxes automatically withheld from their income. If you don't make estimated tax payments throughout the year, you could owe a significant amount when you file your tax return.
(To better understand how it works, here's a look at the differences between 1040 and 1099 tax forms.)
Additional income sources
Receiving additional income from sources such as freelance work, rental properties, investments, or side gigs can increase your tax liability. This income may not have taxes withheld, so you might need to make estimated tax payments to cover the additional tax owed.
Changes in life circumstances
Life changes such as marriage, divorce, the birth of a child, or changes in employment can affect your tax situation. These changes can alter your filing status, eligibility for credits and deductions, and the amount of tax withheld from your paychecks. Failing to adjust your withholding or estimated tax payments accordingly can result in owing taxes at the end of the year.
Tax credits and deductions
Eligibility for tax credits and deductions can fluctuate from year to year. If you relied on certain credits or deductions in the past but are no longer eligible for them, your tax liability may increase. For example, losing eligibility for the Earned Income Tax Credit (EITC) or education credits can lead to a higher tax bill.
Underpayment of estimated taxes
If you're required to make estimated tax payments and fail to pay enough throughout the year, you may owe taxes when you file your return. The IRS requires that you pay at least 90% of your current year's tax liability or 100% of the previous year's tax liability (whichever is smaller) to avoid underpayment penalties.
How to pay your taxes
You have several options for how to pay your taxes. Choosing the right method depends on your financial situation, convenience, and preferences. These days, most people are only interested in knowing how to pay taxes online due to its convenience and security, but we also explore traditional methods you can use.
1. IRS direct pay
This is a free service that allows you to pay your tax bill directly from your checking or savings account. You can schedule payments up to 30 days in advance and receive immediate confirmation when your payment is made. This service is available 24/7 and is a secure way to ensure your payment reaches the IRS on time.
2. Electronic Federal Tax Payment System (EFTPS)
The EFTPS is ideal for individuals and businesses that need to make frequent payments. This is a free system that allows you to pay federal taxes electronically via internet or phone. You must enroll in the system, but once registered, you can schedule payments in advance and track your payment history.
3. IRS2Go app
The IRS2Go app provides a mobile-friendly way to make payments, check your refund status, and access other IRS services. You can use the app to make payments via IRS Direct Pay, debit, or credit card.
4. Credit or debit card
You can also pay your taxes using a credit or debit card. The IRS partners with several third-party payment processors that charge a fee for this service. While using a card can be convenient and may help you earn rewards points, it's important to consider the processing fees and potential interest charges if you don't pay off your credit card balance in full. You don’t want to end up ultimately paying out even more than you originally owed.
5. Electronic funds withdrawal
When e-filing your tax return, you can opt for an electronic funds withdrawal. This method allows you to schedule your tax payment to be automatically withdrawn from your bank account on a specified date.
6. Check or money order
You can mail a check or money order made payable to the “United States Treasury.” Be sure to include your name, address, Social Security number, phone number, tax year, and form number on the check or money order. Mail your payment to the address listed on your tax return or notice.
7. Cash
Although less common, you can pay your taxes in cash at certain IRS Taxpayer Assistance Centers. You must call ahead to make an appointment and bring the exact amount you owe.
Do you have to pay taxes immediately after filing?
After filing your tax return, you might wonder if you immediately need to pay any taxes owed. The answer depends on your specific situation. If you owe taxes, the payment is generally due by the federal tax filing deadline, which is typically April 15th. However, you do not have to pay immediately upon filing if you file before the deadline. You have until the due date to make your payment without incurring late payment penalties.
What happens if you don't pay on time?
Failing to pay your taxes by the deadline can result in penalties and interest charges. The IRS charges a late payment penalty, which is typically 0.5% of the unpaid taxes per month, up to a maximum of 25% of the unpaid taxes. Interest also accrues on any unpaid balance until it is fully paid off.
What if you can't afford to pay your taxes when they're due?
If you find that you're unable to pay your taxes in full by the filing deadline, don't panic. The IRS offers several options to help you manage your tax debt.
Take action promptly
If you're unable to pay your taxes in full, it's essential to take action promptly. By addressing your tax obligations proactively and exploring available payment options, you can avoid escalating penalties and take control of your financial situation effectively.
- File your tax return: Even if you can't pay the full amount, filing your tax return on time can help minimize penalties. The failure-to-file penalty is generally more significant than the failure-to-pay penalty.
- Contact the IRS: Consider contacting the IRS to discuss your options. They may be able to provide guidance or suggest alternative solutions based on your specific financial circumstances.
Payment options for tax debt
- Short-term payment plan: You can request a short-term payment plan, which gives you up to 120 days to pay your tax bill in full. This plan does not have a setup fee, but interest and penalties will continue to accrue until the balance is paid off.
- Long-term payment plan (Installment Agreement): If you need more time to pay, you can apply for a long-term payment plan. This allows you to make monthly payments over an extended period. There is a setup fee for this plan, which varies based on your income and payment method. You can apply online, by phone, mail, or in person.
- Partial payment installment agreement: If you cannot afford to pay your full tax liability, you may qualify for a partial payment installment agreement, which allows you to make reduced monthly payments.
- Offer in compromise: In certain circumstances, the IRS may accept an offer in compromise if you can demonstrate that paying the full amount would cause financial hardship. This option allows you to settle your tax debt for less than the full amount owed.