MONEY MANAGEMENTFrom the Virginia Society of Certified Public Accountants - Presented by Dean Knepper, CPA, CFP®
CPAs POINT OUT CONVENIENCE OF ELECTRONIC TAX PAYMENT OPTIONS
(March 1, 2007) -- The Virginia Society of CPAs points out that there are now three convenient and secure ways to settle your tax liability without writing a check. Here is an explanation of how you can take advantage of each of these alternatives.
Electronic Funds Withdrawal
Electronic funds withdrawal (EFW) can be used by taxpayers who file electronically,
either on their own or through a paid tax preparer. When you choose the electronic
funds withdrawal option, you are authorizing the U.S. Treasury Department to
transfer the specified payment amount from your bank account to the Treasury’s
account. The IRS does not charge a fee for electronic fund withdrawals, but
your bank may.
You will need to provide your account number, type of account (savings or checking), and your financial institution’s routing transit number. This number can be found along the bottom of your check.
You may select the payment date on which you would like the funds to be withdrawn from your account. This means you can file your return early and keep the money in your account until the payment due date. The transaction will show up on your bank statement as “United States Treasury Tax Payment.”
Credit Card Payments
You can pay your taxes by credit card whether you file electronically or on paper. Credit card payments can be made by phone, online, or when e-filing, using a Visa Card, American Express Card, Discover Card, or MasterCard.
The IRS has contracted with several credit card payment service providers to offer this payment option. These providers charge a service or “convenience” fee based on the amount of the payment and will inform you of the amount before you authorize the payment. This fee, which may vary by service provider, is a non-deductible personal expense.
When paying by phone using your credit card, a recorded script prompts you through the required steps. When paying via the Internet or tax preparation programs, the software guides you through the process. A confirmation number is provided at the end of the phone or Internet transaction.
Your tax payment will be listed on your credit card statement as "United States Treasury Tax Payment" as proof of payment. The convenience fee is listed separately on the statement, generally as a "Tax Payment Convenience Fee."
Keep in mind that if you charge your tax payment, but don’t pay off your credit card balance in full, you’ll end up paying interest.
Electronic Federal Tax Payment System
The Electronic Federal Tax Payment System (EFTPS) is a free service offered by the U.S. Department of the Treasury. It allows you to make tax payments through the Internet, or by phone. You can use it to pay taxes associated with more than 20 tax forms, including amended returns and estimated tax payments. This option is especially convenient for taxpayers who make more than one tax payment per year. You can enroll for this service at www.EFTPS.gov or by calling the EFTPS at 1-800-555-4477.
Here is how it works. To make a payment, you access EFTPS directly, 24 hours a day, seven days a week, and request that funds be moved from your account to the Treasury's account. This must be done by 8:00 p.m. (EST) at least one day in advance of the payment due date. You can schedule payments up to 365 days in advance of the due date. The funds are not moved from your account until the date you indicate. You receive an immediate acknowledgement of payment, and your bank statement confirms the payment was made.
If you have any questions about these payment options, a CPA can help.
The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at www.vscpa.com.
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