Updated January 2024 for Tax Year 2023
We recommend making online payments to the IRS, for speed, security, and ease of tracking.
This page from the IRS site describes the various ways to make a payment:
Best option: If you already have an IRS Account (or are willing to create one -- we certainly recommend having one -- it takes about 15 minutes to go through the identity verification), then log in and pay from there. You can save your bank account and routing number for future payments, and your payment history is visible for the last couple of years.
Second-best: Direct Pay "with bank account" (no processing fees). You may also pay by credit card. You do not create an account for this one-time payment option. Have a recently filed tax return at hand to answer the identity verification questions.
Although an extension gives you six more months to file your tax return, there is no extension of time for paying the income tax you owe. In other words, your 2023 federal and state taxes are still due on the personal return due date of April 15, 2024.
If you owe, you may be assessed penalties and interest. These are proportionate to the amount owed, so owing a little is not a big deal. But owing a lot could be costly. The current IRS interest rate for underpayments is 8%, compounded daily -- the highest we've seen in years.
Filing and paying sooner than later after April 15th will curb the amount of interest charged. If you miss our March 18th data deadline, take advantage of our summer filing season and get us your complete tax data by June 17th for filing by July 31st. (More info on our Due Dates page.)
How do you know if you should make a payment by April 15th? If you did year-end tax planning with The Business Guides, you should know the answer to this question, and you probably made a 4th Quarter estimated tax payment in January 2024 based on our analysis of your tax liability. If you regularly receive a tax refund and your tax situation has not changed dramatically, you are probably don't need to make an additional payment.
If you think you will owe taxes, here's our general advice: pay in for 2023 at least 100% of the tax shown on your 2022 return (110% if your AGI was over $150,000). Find your "total tax" on line 24 of last year's Form 1040, or on our three-year Tax Summary page, see OTHER TAXES > Total tax.
You may have already paid enough in to the IRS over the past year to cover 100% of last year's total tax -- add up your quarterly estimated tax payments, withholding on W-2 wages or retirement distributions, etc. If you haven't paid in enough to cover 100% of last year's total tax, we recommend making an additional payment by April 15th to bring you up to that amount. This avoids the underpayment penalty.
To alleviate underpayment interest:
Making an online payment (make sure it's applied to your 2023 Form 1040) may automatically file an electronic extension for you. It is helpful if you can send us the confirmation email to add to your file.
And if underpaying taxes stresses you out, let's do year-end tax planning! These consultations happen July through December 2024, and can run into the first half of January 2025 for those without owner payroll. If interested, email Shelly to get on the outreach list.