How do you pay your taxes? Check or EFTPS?

[DocInColo]

Curious how fellow Bogleheads pay quarterly and year-end taxes. Do you use a paper check and form 1040ES or do you go fully electronic with EFTPS?

On the one hand, paper checks make me feel safer because of all the recent high-profile cyber attacks, including SolarWinds which affected the IRS. I want to minimize the amount of websites that have access to my bank account info. But, USPS has proven themselves entirely unreliable as of late. I have had multiple pieces of mail get lost (including certified mail that just disappeared), and I fear that COVID will only delay the processing of paper checks.

Curious what others think and how you pay taxes. Is the convenience of EFTPS worth the potential security risk?

[Stinky]

EFPTS.

USPS has proven itself entirely unreliable over the past several months.

[Mike Scott]

credit card for bonus points

[livesoft]

I signed up for EFTPS, but to get signed up took too long and getting snail mail, so I switched to DirectPay. I don't think there is any special security risk with that. I don't even think DirectPay keeps your credentials.

[Chip]

EFTPS, for several years. I like the ability to schedule all 4 estimated payments in one session.

I use a similar system for state income taxes.

[plannerman]

I have my payments withheld from my my IRA (usually RMD) distributions in December. That way, I don't have to make estimated tax payments, and amounts withheld are considered to have been paid throughout the tax year

plannerman

[jebmke]

EFTPS for many years.

[backpacker61]

EFTPS, for several years. I like the ability to schedule all 4 estimated payments in one session.

+1

[Windylotus]

EFTPS for Fed & TAP for state (Montana)

Super easy with a digital record

[beyou]

Keep an extra checking account that is only holding enough cash for such electronic payments that are due soon. Keep balance low most of the time. I only give out this checking acct # (to IRS, paypal etc). I have another checking account where I get more interest, use bill pay for credit cards, atm cash withdrawals, and transfer funds as needed to the low balance acct. The primary could be a cash management account with bill pay if you used Fido, Etrade etc with good banking features, but with Vanguard this is not the case. But costs nothing to have 2 checking accts. If IRS (or paypal) is hacked, the acct # they get would be the one with low balance, reducing my exposure.

[MikeG62]

I use Direct Pay for Federal estimated tax payments.

[jfn111]

I still write a check and snail mail for quarterly payments. The State is quick to cash the check while the Fed takes their sweet time. (I'm in no hurry to see the money leave my account).
Year end taxes are electronic since I'm always owed something.

[jebmke]

I still write a check and snail mail for quarterly payments. The State is quick to cash the check while the Fed takes their sweet time. (I'm in no hurry to see the money leave my account).
Year end taxes are electronic since I'm always owed something.

Sounds like you should reduce the quarterly payments if you are always getting a refund.

[Vanguard Fan 1367]

I use Direct Pay for Federal estimated tax payments.

I use that also.

[humblecoder]

I pay my taxes with EFT. I use a checking account that I specifically don't park money in. It is used solely for my monthly bills. After bills are paid, the balance in that account remains quite low. Therefore if somebody did try to drain my account, it is a fraction of my total net worth.

Also, I get text alerts every time there is a withdrawal from this checking account so if somebody was trying to drain my account, I'd know about it quickly.

One final point. Paper checks are a security risk in and of themselves. They have your account number and routing number printed right on them in plain text! At least with an EFT, this information is usually encrypted. Yes, I know that any electronic system can be hacked, but at least it takes some effort to get your account number information from an electronic system. All somebody has to do with a paper check is to read it - no effort whatsoever!

[aristotelian]

I am back to checks. EFTPS doesn't give me any kind of notification for the auto payments. I like having a canceled check image to make sure the payment went through.

[ipdiddly]

I set a calendar reminder on my pc to remind me of the payment dates, then I go to IRS Direct Pay (https://www.irs.gov/payments/direct-pay ) and make the payment. Simple and straightforward. I print a copy of the confirmation and file it away so I don't forget to input the amount of taxes paid when I do my taxes. Do similar for state tax payment. Starting this year, now that I must take RMD's, I will probably set up a substantial withholding from my RMD.

[jebmke]

I am back to checks. EFTPS doesn't give me any kind of notification for the auto payments. I like having a canceled check image to make sure the payment went through.

my bank records a debit from the IRS and sends me a text message the minute it hits. Never fails.

Edit - record looks like this (amount removed by me)

Amount: $x,xxx
Description:Federal Tax
Posted Date:September 10, 2020
Category:Federal Tax
Original Description:IRS USATAXPYMT ***********2030
Status:Posted
Transaction Type:Usataxpymt
Additional Details:Ach Withdrawal

[solar99999]

credit card for bonus points

+1

Bank of America Travel Rewards + Platinum Honors = 2.625% which beats 1.99% credit card fee charged by multiple vendors

[jfn111]

I still write a check and snail mail for quarterly payments. The State is quick to cash the check while the Fed takes their sweet time. (I'm in no hurry to see the money leave my account).
Year end taxes are electronic since I'm always owed something.

Sounds like you should reduce the quarterly payments if you are always getting a refund.

I don't disagree but I have no idea how much 1099 income I'm going to make in a year. I tend to overpay my taxes a bit just so there won't be any big tax hits at year end.

[jebmke]

then this statement doesn't really apply in your case.

(I'm in no hurry to see the money leave my account).

[jfn111]

then this statement doesn't really apply in your case.

(I'm in no hurry to see the money leave my account).

Since I know I'm slightly overpaying it makes sense that I'm in no hurry to see it leave the account.

[cadreamer2015]

EFTPS

They send me an email when I set up the payment. They send me an email when the payment is about to go out. My bank shows it in my transaction record after the payment is made. I like the ability to schedule quarterly estimated payments in advance.

[jebmke]

EFTPS

They send me an email when I set up the payment. They send me an email when the payment is about to go out. My bank shows it in my transaction record after the payment is made. I like the ability to schedule quarterly estimated payments in advance.

Also, there is no ambiguity about when the bank will see the debit. You don't have to park cash in your checking account waiting for someone to process the check.

It still blows my mind that we still use little pieces of paper to transfer money in this country.

[midareff]

I use EFTPS Quarterly. At the beginning of the year I do estimates and set up quarterly pays from the account I use to transfer for that purpose. If something happens during the year that would change my estimate significantly I either add or change a scheduled payment.

[TSC15]

I have been using the IRS Directpay for many years, never a problem. However, last April IRS withdrew my 1040 payment twice on the same day; fortunately I had the fund to cover it. I took me and my bank several weeks to resolve the double payments. The bank rep said she is full time dealing with the IRS and my issue is straight forward compared to her other cases. I think I might try the EFTPS this year, if the system is different from Directpay.

[Broken Man 1999]

I send in some taxes occasionally throughout the year via withholding on our TIRA distributions.

Then, for the last little bit due, I have usually mailed a check. But, for last year's taxes, and on a continuing basis I will most likely charge the final amount due.

USPS has been hammered, and I have no idea when they will emerge from 2020's level of service to pre-covid level. Hopefully soon, but who knows? By charging my taxes, one less piece of paper possibly going astray.

We actually have had good delivery in our neighborhood, the mail is always ours, and doesn't belong to someone else. And, as near as I can tell, what we are receiving matches our expected mail as per the USPS Informed Delivery program, the occasional miss shows up the next day. Of course our mail guy has little to do with what has happened before he gets the mail.

Broken Man 1999

[mptfan]

Curious how fellow Bogleheads pay quarterly and year-end taxes. Do you use a paper check and form 1040ES or do you go fully electronic with EFTPS?

These are not the only two options, you can also pay electronically using Direct Pay.

https://www.irs.gov/payments/direct-pay

[DocInColo]

credit card for bonus points

+1

Bank of America Travel Rewards + Platinum Honors = 2.625% which beats 1.99% credit card fee charged by multiple vendors

Can you trust the credit card vendors to actually make the payment? That is the only thing that would concern me. They aren't part of the IRS so what would keep them from not paying the IRS on time or just closing up shop after they accept the payment. I suppose you could work with your credit card if there were fraud, but that seems like one more thing to have to deal with or worry about.

[ClevrChico]

I used to use Pay1040.com for credit card cashback. Now that they raised their fee to 1.99%, it's not really worth it.

I'll be going back to DirectPay unless I need to do manufactured spending for credit card bonuses.

[Carguy85]

Irs.gov....(directpay I suppose it’s called) for the first time this year...took maybe 5 minutes. State only slightly longer. I feel silly for all the years of calling my banker to get cashiers checks ready, go to the bank to pick them up then fill out envelopes/paper forms and mail them certified mail...talk about a massive waste of time.

[AlwaysaQ]

I have had Federal taxes withheld from my RMD except for 2020 when I used Direct Pay. I make state estimated payment with one check in April.

[jharkin]

For year end tax due I pay electronic bank draft via tax software (HRBlock desktop version). Frankly I don't know what system its using under the covers - may be EFTPS?

The couple times in my working life that I have had to do quarterly estimated I have done it by paper.

[hoffse]

Cc for bonus points and ~60 days of free float if I need it.

I just opened a new card, hit the sign up bonus with quarterly payments, and earned a little more than $750 in tax-free cash back.

I can also write off the fee as I am self-employed, so I am still netting more than 1% minimum in cash back using the BoA preferred card.

The vendors do pay timely, and your payment is reflected on the IRS’s website about a week after it’s made. The date always matches the day you pay the vendor, NOT the day your IRS account is updated.

[MJS]

This article lists seven (7!) ways you can pay your income taxes. I am charmed by the idea of having the bank do a wire transfer payable to the IRS; it's like taking one of those Edwardian train rides.

[MrBobcat]

EFTPS for Fed & TAP for state (Montana)

Super easy with a digital record

I messed around with TAP 3-4 years ago IMO it was a PITA so I just write one check in April to cover all 4 quarters and forget about it. Do use the EFTPS for the Fed. Might have to try and revisit TAP this year.

[Traveller]

Like others above, I use EFTPS.gov. I pay my quarterlies according to the safe harbor amount, so I can schedule all 4 payments at one time, then forget about it. I recall that the setup and verification steps, which involved physical mail verification, was a slow process but once setup it's been great.

[mrc]

I went to EFTPS to make a 4th quarter payment, the first in about two years. My credentials didn't work, so I asked for a new PIN. Frightened about how close we are to Jan 15th, I found Direct Pay in my notes, and used that to make a payment that day. For that reason, I'll stick to Direct Pay going forward with quarterly estimated taxes, and any balance due.

[FelixTheCat]

EFTPS

[lws]

Withholding from pension.

[Van]

So, am I the only one that did not know you can make estimated tax payments with a credit card?

Is it straight forward, or is some preliminary step required?

[Kompass]

I have checking and HYSA at Ally, it was easy to set up a separate savings account that I just use solely for taxes. My accountant sets up the EFTPS for me and just tells me how much to have in that account, it earns as much interest as regular savings account and I don't worry about missing any dates. If I harvest LTCG (which I did a week ago) I send an email and get an adjusted amount to set aside and the changes are done at their office for me. I pay nothing extra.

[solar99999]

credit card for bonus points

+1

Bank of America Travel Rewards + Platinum Honors = 2.625% which beats 1.99% credit card fee charged by multiple vendors

Can you trust the credit card vendors to actually make the payment? That is the only thing that would concern me. They aren't part of the IRS so what would keep them from not paying the IRS on time or just closing up shop after they accept the payment. I suppose you could work with your credit card if there were fraud, but that seems like one more thing to have to deal with or worry about.

I have personally not encountered any issues with this process. I think I've been doing this for three years.

I have even gone so far as to pay taxes for my other family members in order to collect the credit card rewards and all tax payments have been credited properly to their tax accounts. They reimburse me for the tax payment of course

[Mike Scott]

irs info:

https://www.irs.gov/payments/pay-your-t ... redit-card

[hoffse]

So, am I the only one that did not know you can make estimated tax payments with a credit card?

Is it straight forward, or is some preliminary step required?

You pay through one of the 3 IRS approved vendors, but it’s very simple. Just google “pay estimated taxes credit card” and you will see a link to the IRS website where they list the 3 vendors.

[Van]

So, am I the only one that did not know you can make estimated tax payments with a credit card?

Is it straight forward, or is some preliminary step required?

You pay through one of the 3 IRS approved vendors, but it’s very simple. Just google “pay estimated taxes credit card” and you will see a link to the IRS website where they list the 3 vendors.

Thanks, I'll check it but but I think I smell a fee.

[exigent]

So, am I the only one that did not know you can make estimated tax payments with a credit card?

Is it straight forward, or is some preliminary step required?

You pay through one of the 3 IRS approved vendors, but it’s very simple. Just google “pay estimated taxes credit card” and you will see a link to the IRS website where they list the 3 vendors.

Thanks, I'll check it but but I think I smell a fee.

Yes, there's a fee, but some cards apparently have large enough rewards to offset the fees and provide a small residual bonus.

[kramer]

I just pay with a debit card on Direct Pay for IRS and I do it just once per year (total fixed fee of around $3 regardless of amount). I don't live in the US so I can't rely on the mail. I have found this way the most hassle free for me. I lost my account info on EFTPS way back when, plus I don't even worry about prepaying some estimated taxes now with zero interest rates, my goal is just to reduce hassle.

[TravelGeek]

Credit card (CFU). 1.5 URs per $ at 1.5c value (PYB via CSR). Small profit even with the processing fee. Not worried about the involvement of a 3rd party.

[chemocean]

Just looked at the IRS website of fee. I didn't know I could pay quarterly taxes on Roth conversion by debit card for less than $4.
Credit card fees are 1.96% to 1.99%, which is more than my rewards %.
I think I will stick with my $0.55 stamp, because the postmark determines the legal delivery date for penalty purposes.