How to pay your taxes when you e-file

[cathy63]

When you use Direct Debit through an authorized e-filer, they setup a scheduled payment in EFTPS for whatever date you specify. You cannot see the pending transaction in your own EFTPS account, but if you call the IRS EFTPS support line they can cancel it for you. I did this during the pandemic and natural disasters when tax due dates were moved after I'd already filed.

With Direct Debit, the bank info is not on your tax return and it never goes to the part of the IRS that processes tax returns. The EFTPS debit is a separate transaction from the e-file transmission.

If you get a refund, then Direct Deposit works differently. In that case the bank info is on your 1040 and it gets extracted from the e-file data and sent to Treasury as one of the final steps in processing the return.

 

[Alan]

Does anyone have any examples of a person or organization illegally withdrawing money from their bank account using just their Routing and Account number and no other authorization?

I've given this info to many friends and relatives to pay me money, and I have this info from many friends, relatives and sole contractors to whom I send money, but I have no idea how anyone or any organisation can pull money from my account without a specific authorization to do so. Bank to bank transfer of money is the norm here and it happens in seconds.

 

[cathy63]

What is safe harbor is not met, and you own money to the IRS? Do you still wait until the April 15th date or do you pay early to avoid any additional charges?

It's up to you. You can stop penalties from accruing by paying up to the safe harbor amount as early as possible and then pay the rest on April 15th.

 

[frank05]

Does anyone have any examples of a person or organization illegally withdrawing money from their bank account using just their Routing and Account number and no other authorization?

I've given this info to many friends and relatives to pay me money, and I have this info from many friends, relatives and sole contractors to whom I send money, but I have no idea how anyone or any organisation can pull money from my account without a specific authorization to do so. Bank to bank transfer of money is the norm here and it happens in seconds.

I remember when my company started pushing direct deposit and most people signed up. One of my coworkers left and the company deposited a couple of extra paychecks to their account. One day the extra money was withdrawn, when he inquired the company told him when you give them deposit ability you also give them withdrawal access.

 

[Sunset]

I just don't want my account number (ACH data) in any database it doesn't absolutely have to be. True that they "have" the data off my check, and maybe it is scanned into a database, but I didn't agree to them holding my account info. If you put account number on the form, you're probably agreeing to some fine-print that you haven't taken the time to understand. That's probably fine, because if we can't trust Uncle Sam, who can we trust? But, on principle, I just keep my ACH data in as few databases as possible. I don't find writing a check a big deal. The software prints the voucher and I mail it. True that typing your ACH data is easier in the immediate situation, but if that increases the odds that some day there will be a glitch or bad actor, those few seconds extra for writing the check will be a worthy investment.

Here, we have enough bad people stealing mail from mailboxes, that writing a check is risky.
So I use the ETFS and direct pay and have even just paid via tax return when e-filing.

If money disappears, I can start the blame game with who I used, but writing a check, I don't know who stole it, or cashed it.

 

[Cobra9777]

I always owe a few thousand dollars with the return. I schedule it on the due date using my EFTPS account. IIRC, when you e-file with TurboTax, you have to select the option to "pay by check," which I always thought was weird. It also forces you to print a payment voucher with mailing address.

 

[Jerry1]

What is safe harbor is not met, and you own money to the IRS? Do you still wait until the April 15th date or do you pay early to avoid any additional charges?

The underpayment penalty is assessed and it doesn’t matter when you pay it. Interest will start accruing after April 15.

 

[jollystomper]

I have been using direct deposit/withdrawal for IRS refunds/payments via HRB e-file with for years without issues. For payments I go to www.irs.gov/payments and schedule a payment. I am paranoid about some things, but not this .

 

[audreyh1]

I ended up opening a second savings account to hold expected tax payments. Only EFTPS has this info.

Refunds, which I rarely get are applied to next year’s estimated taxes.

 

[AudiDudi]

I ended up opening a second savings account to hold expected tax payments. Only EFTPS has this info.

Refunds, which I rarely get are applied to next year’s estimated taxes.

I do the same thing - just let any refund go towards next yrs withholding. Much easier, IMO, than making quarterly parments. Same thing for State tax.

 

[imjustawarrior]

I use TT and let it draft/deposit directly from our checking account. I have been doing this for 20+ years with no issues state or federal.

US Bank has the 4% smartly credit card. I may apply for it this year. The 4% is enough to overcome every CC fee I have ever seen. I would then use the CC to pay all that I can to include taxes. And yes the 4% even applies to paying taxes.

 

[Alan]

I remember when my company started pushing direct deposit and most people signed up. One of my coworkers left and the company deposited a couple of extra paychecks to their account. One day the extra money was withdrawn, when he inquired the company told him when you give them deposit ability you also give them withdrawal access.

So nothing fraudulent then, the company was given specific permission via a direct debit mandate.

 

[G-Man]

The underpayment penalty is assessed and it doesn’t matter when you pay it. Interest will start accruing after April 15.

That's great that it does start accruing until April 15th. The plan is to e-file via TurboTax and pay in full on April 14th.

 

[sengsational]

Here, we have enough bad people stealing mail from mailboxes, that writing a check is risky.
So I use the ETFS and direct pay and have even just paid via tax return when e-filing.

If money disappears, I can start the blame game with who I used, but writing a check, I don't know who stole it, or cashed it.

We had a mailbox bandit in the neighborhood, supposedly, but that was a decade ago. But it seems like a weird criminal to both be out on the street sneaking around and then have the sophistication to either use the account number or fence stolen checks.

I will admit it's very rare that account numbers are leveraged fraudulently. But such a pain if it does happen.

I've had two instances in 40 years, and that was enough. Both were entities where I gave permission, but their mistake became my problem! So here I am, calling, wasting my time, and meanwhile my money is gone. So my solution is to give permission only when there's good reason. A postage stamp isn't a good reason.

 

[Jerry1]

It's up to you. You can stop penalties from accruing by paying up to the safe harbor amount as early as possible and then pay the rest on April 15th.

The underpayment penalty is assessed and it doesn’t matter when you pay it. Interest will start accruing after April 15.

That's great that it does start accruing until April 15th. The plan is to e-file via TurboTax and pay in full on April 14th.

It might be a good idea to reach out to @cathy63 since it appears we’re not in full agreement. I couldn’t find an irs publication that explains your situation. But, in my experience, the tax year is over so there’s nothing you can do to change the calculation of the penalty. You would have had to have money in by January 15th. And, in my years of preparing returns, I never saw additional penalty or interest levied as long as the return was finalized by April 15th.

 

[cathy63]

It might be a good idea to reach out to @cathy63 since it appears we’re not in full agreement. I couldn’t find an irs publication that explains your situation. But, in my experience, the tax year is over so there’s nothing you can do to change the calculation of the penalty. You would have had to have money in by January 15th.

The underpayment penalty is calculated using the worksheet in the instructions for Form 2210.

If you go through Form 2210 and the worksheet what you end up doing is:
- calculate the minimum required quarterly payment for each quarter based on safe harbor rules or annualized income method
- figure out how many days after the due date you satisfied that minimum
- for each quarter, multiply each underpayment x (number of days late/days per year) x quarterly interest rate
- add all the individual penalties together

If you have not yet met the safe harbor, then the underpayment penalty for today is (amount you missed the safe harbor by) x .07/365, so ~19 cents per $1000 per day, or ~$5.75 per $1000 per month -- not exactly a fortune. As soon as you get your payments up to the safe harbor amount, (amount you missed the safe harbor by) = 0 for that day and all future days and the penalty stops accruing.

And, in my years of preparing returns, I never saw additional penalty or interest levied as long as the return was finalized by April 15th.

I agree that the IRS will often overlook the penalty. Some software, like TurboTax, will calculate it for you by default and include it on your return, but you can tell it not to and just wait for the IRS to send a letter.

For our Tax-Aide clients we don't calculate the penalty and we just tell them they might get a letter and if they do it's legit and they should pay it, and we try to convince them to fix their withholding. Usually they don't hear from the IRS unless they have an underpayment for 3 consecutive years, so some of them don't believe there is such a penalty and then they get mad at us when they finally do get a letter.

The CA FTB is much more rigorous and if you owe them more than $500 they'll be happy to send a penalty letter right away.

 

[Koolau]

I just don't want my account number (ACH data) in any database it doesn't absolutely have to be. True that they "have" the data off my check, and maybe it is scanned into a database, but I didn't agree to them holding my account info. If you put account number on the form, you're probably agreeing to some fine-print that you haven't taken the time to understand. That's probably fine, because if we can't trust Uncle Sam, who can we trust? But, on principle, I just keep my ACH data in as few databases as possible. I don't find writing a check a big deal. The software prints the voucher and I mail it. True that typing your ACH data is easier in the immediate situation, but if that increases the odds that some day there will be a glitch or bad actor, those few seconds extra for writing the check will be a worthy investment.

Can you imagine a data breach at the IRS like the ones recently in the news (and in our mail boxes?) I wonder if they would "settle" with their "customers" for $7.50 or whatever.

 

[AudiDudi]

Can you imagine a data breach at the IRS like the ones recently in the news (and in our mail boxes?) I wonder if they would "settle" with their "customers" for $7.50 or whatever.

Seems there was a link a couple months ago to check if your info was on the dark web after the IRS amd otjer gov't databases were hacked. SS numbers, etc. If you have ever written a check, your acct/routing number is likely in some database including your banks that reports to the gov't. I'd say if you think your check number along with acct number and routing number is discarded and not stored in a database - good luck!

 

[Sunset]

We had a mailbox bandit in the neighborhood, supposedly, but that was a decade ago. But it seems like a weird criminal to both be out on the street sneaking around and then have the sophistication to either use the account number or fence stolen checks.
..........

Around here it is a real problem.
Criminal groups have stolen/gotten postal keys, so they can open mailboxes and mailbox rooms to steal the mail.
Other mailboxes are so badly maintained, they are literally rusting out at the bottom, and you can grab mail from inside.

I think for the criminals it's a bulk operation, grab enough mail to fill some laundry baskets, then sort through to find checks, credit cards, credit card statements, money, etc..

Just a couple of weeks ago, I went to the post office to drop off my mail with the clerk to avoid the mailbox, and I saw a couple putting cash into envelopes with cards. I'm amazed folks actually still mail cash.

 

[Koolau]

Around here it is a real problem.
Criminal groups have stolen/gotten postal keys, so they can open mailboxes and mailbox rooms to steal the mail.
Other mailboxes are so badly maintained, they are literally rusting out at the bottom, and you can grab mail from inside.

I think for the criminals it's a bulk operation, grab enough mail to fill some laundry baskets, then sort through to find checks, credit cards, credit card statements, money, etc..

Just a couple of weeks ago, I went to the post office to drop off my mail with the clerk to avoid the mailbox, and I saw a couple putting cash into envelopes with cards. I'm amazed folks actually still mail cash.

I wouldn't send more than a few dollars via USPS BUT I don't recall sending a letter that either didn't get to where it was going or was returned due to bad address. IOW I wouldn't be too concerned about sending cash though there is no need to do that.

 

[Morgan22]

I just schedule TurboTax to withdrawal from my bank account near the 4/15 date. Not sure if it is TurboTax or the IRS that does the scheduling but it has always worked.

I've done the same in the past with TurboTax.

 

[Jerry1]

The underpayment penalty is calculated using the worksheet in the instructions for Form 2210.

If you go through Form 2210 and the worksheet what you end up doing is:
- calculate the minimum required quarterly payment for each quarter based on safe harbor rules or annualized income method
- figure out how many days after the due date you satisfied that minimum
- for each quarter, multiply each underpayment x (number of days late/days per year) x quarterly interest rate
- add all the individual penalties together

If you have not yet met the safe harbor, then the underpayment penalty for today is (amount you missed the safe harbor by) x .07/365, so ~19 cents per $1000 per day, or ~$5.75 per $1000 per month -- not exactly a fortune. As soon as you get your payments up to the safe harbor amount, (amount you missed the safe harbor by) = 0 for that day and all future days and the penalty stops accruing.


I agree that the IRS will often overlook the penalty. Some software, like TurboTax, will calculate it for you by default and include it on your return, but you can tell it not to and just wait for the IRS to send a letter.

For our Tax-Aide clients we don't calculate the penalty and we just tell them they might get a letter and if they do it's legit and they should pay it, and we try to convince them to fix their withholding. Usually they don't hear from the IRS unless they have an underpayment for 3 consecutive years, so some of them don't believe there is such a penalty and then they get mad at us when they finally do get a letter.

The CA FTB is much more rigorous and if you owe them more than $500 they'll be happy to send a penalty letter right away.

I agree that it’s best to let the irs calculate the penalty but if your income was lumpy, it’s better if you include the 2210 with your return so you’re not arguing about that after they send you the bill.

Cathy - I don’t see how the penalty can be minimized after Jan 15th and I don’t see how interest can start accruing until after April 15th. So I don’t understand what benefit one would get from paying anything between those two dates. Am I missing something - that the penalty is calculated past Jan 15th?

 

[tenant13]

I sign up for one or more new credit cards with massive bonuses and use payment portals like to settle (for around 2% fee). I then convert the points into first/business class flights to far away destinations - Japan is fairly easy.

 

[cathy63]

I agree that it’s best to let the irs calculate the penalty but if your income was lumpy, it’s better if you include the 2210 with your return so you’re not arguing about that after they send you the bill.

Cathy - I don’t see how the penalty can be minimized after Jan 15th and I don’t see how interest can start accruing until after April 15th. So I don’t understand what benefit one would get from paying anything between those two dates. Am I missing something - that the penalty is calculated past Jan 15th?

Suppose that your safe harbor was $4000, so you planned to pay $1000 at each of the four quarterly payment dates. You make the first 3 payments on time but you forget to make the fourth payment.

Scenario 1) you realize on Jan 31 2025 that you forgot that fourth payment and you make the $1000 payment then (16 days late) . Then you file your return as usual on Apr 15 2025 and pay the rest of what you owe. At that time, you calculate your underpayment penalty for being late on that Q4 payment. The penalty is $1000 x 16/365 x .07 = $3.07.

Scenario 2) same as above except you decide "oh well, I missed it, I'll just wait and pay on April 15 with the rest of my tax." So that Q4 estimate is now 90 days late and your underpayment penalty is $1000 x 90/365 x .07 = $17.26.

By paying up to the safe harbor amount on Jan 31, you prevented an additional $14.19 of penalties from accruing. This works because the underpayment penalty is literally just the interest that was due on the money between the date you should have paid it and the date you actually paid it.

If you don't pay the entire amount you owe for the prior year by April 15, then you start racking up Failure to Pay penalties, which are much more onerous than the Underpayment penalty.

 

[audreyh1]

So missing an estimated tax deadline you pay a penalty based on how many days you are late. That seems straightforward and was what I thought. Some folks have thought otherwise.

Thanks for clarifying underpayment penalty versus failure to pay penalty.