More of us are using electronic financial transactions and that includes our tax dealings.
Millions of us e-file our returns, get our refunds via direct deposit and pay any outstanding tax bills electronically.
A popular e-payment method is by credit card. This works for folks who have their credit card balance under control, can pay any charges in full so as to avoid interest and who earn rewards for using the card.
Of course, paying your taxes by credit card also will cost you a fee.
If you want to electronically pay your tax bill and avoid any extra charges, Today's Tax Tip is that you consider using the Electronic Federal Tax Payment System, or EFTPS.
EFTPS, pronounced "Ef-tips" in case you want to drop it into casual conversation, is the Treasury Department's free online payment system for businesses and individuals.
I've used it for years to pay both estimated taxes and our annual tax bill. After a few shaky encounters early on, a combination of system glitches and my own missteps, I've become a big fan.
Give yourself time: To use EFTPS you must enroll. And it doesn't provide you instantaneous access to the system.
Although the Internal Revenue Service wants all of us to eventually file and pay our taxes electronically, it still relies on the traditional mail service to get folks into EFTPS.
That takes about a week, so you need to sign up for EFTPS before your tax payment is due so that you don't miss the deadline.
Enrollment steps: To get started, you need your taxpayer identification number, or TIN. For an individual taxpayer, this is your Social Security number; for a business, the company's Employer Identification Number, or EIN.
Also get the account and routing numbers of the bank account you want to use to pay your taxes. Check with your financial institution regarding the routing number. The one used for electronic payments might not be the one that's on your checks.
And you of course need your name and address and name as they appear on your IRS tax documents. For married couples who file joint returns, this generally is the name of spouse listed first on the 1040.
Once you've got all this info, go to the EFTPS page and:
- Select Enrollment.
- Select Business, Individual or Federal Agency.
- Enter the requested information.
- Submit.
In seven business days, you should receive your EFTPS personal identification number, or PIN, in the mail.
Now you're ready to get your password so you can use the system.
Go to www.eftps.gov and click Log In and then click Need a Password.
Enter your tax identification number (Social Security number or EIN) and the PIN you got via snail mail.
Verify your banking information or your EFTPS enrollment number, which appears on your PIN letter, and select Next which will let you create your new EFTPS password.
Now you're ready to make your tax payment by going back to the EFTPS home page and selecting Make a Payment. Once you log in with your tax ID number and new password, the step-by-step screens will walk you through the payment process.
As with all tax transactions, save a copy of the payment confirmation page for your records.
Yes, it takes a while to set up an EFTPS account.
But once you have one, you can schedule your payments in advance — a nice way to deal with estimated tax payments; remember the first 1040-ES for 2012 also is due April 17 — and not have to worry about added fees for settling your IRS debt.
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