In the movies—and sometimes in real life—the Internal Revenue Service (IRS) is often portrayed as an evil government agency to be loathed and feared. While paying federal taxes isn’t on anyone’s top 10 list of fun activities, we each have an obligation to be financially responsible—and that includes working directly with the IRS from time to time.
Why Having Your Own IRS Account is Important
Creating an online account with the IRS is a relatively easy task that can be done on your own or with the help of a tax professional. Having an IRS account allows you to access important information, view your refund status, and easily make and track payments to the IRS.
The recently passed Inflation Reduction Act of 2022 included $79.6 billion in funding to help the IRS and related agencies modernize their systems and boost their staffing to increase taxpayer services and enforcement of the tax code. The bottom line is that we can expect the IRS to become more diligent about collecting monies due as their new funding begins to be utilized.
How to Create an IRS Account
To set up an IRS account, you will request one and go through a process to validate your identity to ensure only the correct persons are granted access.
Go to the IRS homepage where you will find a section entitled Go to Your Online Account. Click the link provided to Create or View Your Account.
Identity Validation
The IRS uses a technology company called ID.me for identity authentication. If you have an existing ID.me account that you have used with another agency such as the Veterans Administration (VA) or a state unemployment compensation website, you will use that same sign in to get started.
If you have not used ID.me previously, have your driver’s license or U.S. passport available to complete their verification process and create an IRS online account. You will be asked for a valid email address and to set up a password, to set up multi-factor authentication (MFA)—a process that sends a text, code, or key to a phone number, email account, or app that you then respond to—and submit photos (front and back) of your identification document.
You can choose the self-service option of doing a video validation that scans your face and compares it with the image in your document, this option requires a smartphone. You then confirm that a sample of data retrieved is yours and the ID.me credential is created. Alternatively, you can complete a live call with an agent who does the verification. Additional options are available for those who do not have a smartphone.
IRS Profile Set-Up
Your IRS account profile lets you update your name, address, email and password, while providing you with links to any forms that must be completed. Within your profile, you can also allow or restrict access by authorized tax professionals and indicate your preference of whether you would like to receive communications online, on paper or both.
IRS Payment Methods
The IRS website allows you to make a single payment electronically and select which tax year you want it applied to. You may make the payment as a guest without logging in or you can have your numbers at your fingertips when you sign into your IRS account. Payments will be applied to interest and penalty assessments first, then toward your tax obligation.
Payments for individuals can be made directly from checking or savings accounts (Direct Pay). This method is available at no cost to the taxpayer and offers an easy way to pay income and estimated taxes.
Individuals, businesses, and trusts can make payments using the Electronic Federal Tax Payment System (EFTPS) that requires its own enrollment. With EFTPS you can schedule payments up to a year in advance and pay income, employment, estimated, and excise federal tax payments. Payments using EFTPS may be made using checks, money orders, and debit or credit cards. Fees will apply when paying by card.
IRS Payment Plans
For those facing higher tax bills, selecting a short- or long-term payment plan may be a more feasible solution than making a single payment. Both types of plans must be applied for and may not be available under certain circumstances. For example, those who have defaulted or ended previous payment plans may not be offered the payment plans. Alternatively, a payment plan may need to be set up through a representative if there are extenuating circumstances.
Short-term payment plans must be paid within 180 days and can be made by direct payments or through the EFTPS system. There is no set up fee, but interest will accrue until the balance is paid in full. Short-term payment plans may be available to those owing less than $100,000 in combined tax, penalties, and interest.
Long-term payment plans—also called Installment Agreements—can be set up online for individuals owing up to $50,000 in combined tax, penalties, and interest providing all required tax returns have been filed. Those owing $25,000 or more must use the Direct Payment method. Businesses who have own $25,000 or less may also apply for installment agreements online when all required returns have been filed.
Both short- and long-term payment plans have set up fee costs which are reduced when the plans are applied for online. Applying by phone, mail, or in person incurs a higher rate. The setup fee may be waived for reduced for low-income earners and penalties and interest will continue to accrue until the balance is paid in full.
Stay Involved
Dealing with the IRS is intimidating for many individuals. Using the IRS website to create an account provides you with ample time to review your records and complete payments or other activities without the pressure (or wait!) of speaking with an IRS representative to get the identical information.
Managing payments from your IRS account provides you with a streamlined process that negates the risk of having a monthly check get lost and reduces the chance that your payment would be misapplied.
Continue the Conversation
At Clayton & McKervey, we encourage our private clients to create an IRS account for ongoing access to their IRS records. If you would like additional information on setting up an account with the IRS or with other matters, please feel free to contact us for support.
