The IRS offers two methods for making tax payments electronically – Direct Pay and the Electronic Federal Tax Payment System, also known as EFTPS. Both systems are free, but they do work differently.
Below is a description of each service, as well as a summary of the advantages and disadvantages of each service.
Direct Pay is the easiest and fastest method for making tax payments electronically. Payments are made by ACH transfers from your checking or savings account at a US bank. No previous set up or enrollment is required. To use Direct Pay, simply visit the Direct Pay website and follow the instructions. Payments are immediate or can be scheduled up to 30 days in advance.
Advantages: The primary advantage of Direct Pay is that there’s no need to sign up or register to use this service. Therefore taxpayers who need to make immediate payments must use Direct Pay. In addition, Direct Pay is a good solution for any taxpayer who just needs to make an occasional tax payment and doesn’t want to go through the hassle of enrolling in EFTPS.
Disadvantages: The primary disadvantage of Direct Pay is that the system does not save any information. As a result, each time you use Direct Pay, you have to verify your identity using information from a tax return for the last six years. In addition, you cannot view a payment history, and you cannot retrieve a confirmation number once you leave the site
EFTPS is a free service offered by the U.S. Department of Treasury. Like Direct Pay, a US bank account is required.
Unlike Direct Pay, EFTPS requires multi-step enrollment process. To begin the process, you must first go to eftps.com and click on enrollment. After this initial step, you will need to wait five to seven days to receive a PIN in the mail. Once you receive a PIN, you can log in using your Social Security Number (or EIN for business taxes) and PIN, and select “Need a Password” to set up your password… Once that is complete, you’ll need your Social Security Number (or EIN), PIN and password each time you log in. Unlike Direct Pay, all types of tax payments can be made with EFTPS, including individual, business, and payroll taxes.
Advantages: The primary advantage of EFTPS is that once the enrollment process is complete, you can log on to EFTPS at any time to schedule one or more payments (up to 365 days in advance in the case of an individual), cancel or modify previously scheduled payments, and view your payment history for the previous 16 months. As a result, EFTPS is ideal for taxpayers who are regularly making and scheduling tax payments.
Disadvantages: The primary disadvantage of EFTPS is that enrollment is required, a process which takes at least one week. And once enrolled, same day payments are not allowed; at least one business day is necessary for a payment to post. As a result, if you need to make an immediate payment, EFTPS is not an option.
How much do I owe?
Keep in mind that neither system will tell you how much you owe — they are only designed for accepting payments. To find out how much you owe, you can sign up for an individual tax account with the IRS at https://www.irs.gov/payments/view-your-tax-account. This service will show your payment history (up to 18 months) as well as any balances due by year.
Don’t wait until the last minute with either method
Both systems are unforgiving of computer or power outages, so it’s wise to plan ahead, or you may be hit with late payment penalties and interest.
No credit cards accepted
Both systems require a bank account, so if you need to use a credit card to make your Federal tax payment, you’ll have to use one of the payment processors made available by the IRS. These processors all charge a convenience fee.
Schanel & Associates is a CPA firm specializing in accounting, tax, business valuation and litigation support serving Palm Beach, Martin and St. Lucie Counties and beyond since 1993. Our CPAs and accounting professionals work with individuals, businesses, estates and trusts to provide everything you need under one roof. For more information, contact us today at 561-624-2118.
Todd Schanel has been a principal at Schanel & Associates since 2004, where he specializes in financial planning, tax planning and consulting services. He also serves as Founding Principal and Director of Investment Advisory Services at Core Wealth Management, our sister company, where he leads an accomplished professional team offering independent and objective financial advice to help clients achieve their financial goals. Todd has been a CFA Charterholder since 2005, and in 2007 he earned his Certified Financial Planner® designation and became a licensed CPA. In 2015, he earned the Certified Valuation Analyst (CVA) designation.