Taxes Blog

Finance Blogs » Taxes » Get ready to e-pay taxes

Get ready to e-pay taxes

By Kay Bell · Bankrate.com
Tuesday, August 24, 2010
Posted: 3 pm ET

Most of us do just about everything via computer these days. We spend our work hours in front of the machines. We electronically connect with family via social networks.

When it comes to personal business, such as paying bills or banking, many of us also head to our PC.

Well, the IRS wants to make sure you have it on your electronic transactions list.

Although the tax agency isn't doing away with paper checks (yet), it encourages us to have our refunds directly deposited.  And when we owe Uncle Sam, the IRS would like us to pay our taxes electronically, too.

One option is the Electronic Federal Tax Payment System, or EFTPS.  You set up an account and then use the system to schedule tax payments directly from your bank account to the IRS.

Once your EFTPS account is established, you can go online 24 hours a day, seven days a week and schedule a variety of personal tax payments up to a year in advance.

Who would do that, you ask? Me, for one.

Although I love the X-Files (thank God for cable reruns!), I'm not a big real-life conspiracy theory nut. So I don't worry about the IRS randomly sticking its fingers into my bank account. And I like the ease of scheduling payments and knowing my tax tasks will be taken care of even when I lose track of deadlines.

I haven't scheduled any tax payments a year in advance, but one instance when it might be worthwhile is for estimated tax payments. These four additional filings a year are paid by folks who get income that's not subject to payroll withholding taxes.

Once you figure out your annual estimated tax payment amounts, which the IRS likes in four equal installments, you can plug that info into your EFTPS account and be done with that tax responsibility for the year. The only thing you have to do is make sure you have the money in your bank account for it to be transferred to the IRS on the dates you pick.

I'm bringing this up right now because the third estimated tax payment for the 2010 tax year is due Sept. 15.

If you'd like to pay it and future tax bills via EFTPS, you need to set up your account now.  Even though it's all electronic, when you register the IRS sends you a personal identification number, or PIN, that you must use to access your account.

But it send that PIN via snail mail. And that takes about a week.

So if you're interested in using the IRS online payment system for your September tax payment, you need to sign up for EFTPS soon.

Do you pay bills online? Do you get your refund as a direct deposit? Would you consider paying the IRS electronically? If not, why not?

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
7 Comments
Bob
September 10, 2010 at 8:15 am

Jack,

Despite the millions spent to secure the system, the hacking continues, the rip-offs continue, and it's the people who have card accounts or do electronic banking that suffer. Also, when the ID theft occurs from these electronic databases, it's both large and devastating. Truth is, there is no such thing as foolproof protection. So I'll stay with the system I know and like, thank you very much.

Jack
September 02, 2010 at 5:19 pm

Bob,

The biggest soure of identity theft is paper checks and statements. Electronic processing has issues but millions of dollars are spent to secure this procedures. I can't say the same for USPS mailboxes.

Our firm processes millions of these transactions with no issues. The only issue that ever comes up is when a check or statement is lost in the mail.

Bob
August 30, 2010 at 4:50 pm

To answer your last three questions: No. No. And no. I have no interest in paying bills on-line, and I personally despise direct deposit. And I sure would never pay the IRS electronically. In all three cases, the reasons are simple. I don't trust electronic manipulation of money. And even if that issue were to be resolved, I can't stand not having a paper trail for payments I make. Plus direct deposit does not provide me the ability to handle payments I receive the way I wish. Paper checks provide the paper trail I want---complete with the ability to print check images showing both front and back of the check. Paper check payments made to me allow me the flexibility to cash or deposit any amount I choose and place it where I want---in one or more accounts at one or more financial institutions of my choosing. If other people want to make or receive payments electronically, that's their business. But I'll be laughing all the way to bank when the system screws up or their accounts are hacked into (and there's plenty of news accounts of both of these happening).

Jack
August 30, 2010 at 2:20 pm

Personal account. But, I gave up on it. Now, we are just w/h more in December on my spouses payroll. The positive is that W2 w/h can all be done in December and it is treated as though it has been taken out through out the year.

Kay
August 30, 2010 at 1:30 pm

Interesting, Jack. Not to get too nosey, but is the PIN problem with a business or personal account? This strikes me as something that shouldn't be happening. I've been using EFTPS for years and have always used the same PIN. I'd touch base with the program to see if there's a problem.

Jack
August 27, 2010 at 3:08 pm

Yes, I was so happy about this option a few years ago. I think it is great except I have had a lot of trouble with the site saying I need to set up a new PIN. Seems like I need to get a new PIN each time I do a quarterly.