Most Taxpayers Get a Tax Refund, But Not All Do: What to Do With a Balance Due Tax Return

If you haven't filed your taxes yet, you probably aren't expecting a refund. Many people don't expect a tax refund and are pleasantly surprised when they do get one. After all, three out of four taxpayers DO get a refund every year. This year is no exception and the current average federal tax refund is $2,866. However, that leaves one taxpayer out of four NOT getting a refund and short of public speaking in your underwear, there is no bigger fear than finding you owe come tax time.

If you have a balance due, first make sure to file and pay your taxes by April 18 or you will be subject to penalty and interest. So even if your return isn't complete, file an extension of TIME to file and PAY any balance due by April 18. Since the extension is only for filing the return and not for paying the taxes owed, you can use one of the following options the IRS offers to pay them their money:

Paying by electronic funds transfer (EFT) - Scoring highest points for safest, quickest, and easiest - and free to use. EFT is an authorization for the IRS to use direct withdrawal from your bank account. You provide the necessary information to the IRS, like your account number and bank routing number, when e-filing your return or by enrolling in Electronic Federal Tax Payment System (EFTPS). Then choose the date of withdrawal and your taxes will be paid on that date. So file early and schedule your payment for April!

Making a credit or debit card payment - Still safe, quick, and easy, but the IRS requires you to pay the convenience fee, which varies between 1.8% and 3.95% based on whether you are using credit or debit and the card provider's fee. Use one of the IRS authorized e-pay service providers to pay by card.

Mailing a check or money order - Make sure your envelope, with the Form 1040-V, Payment Voucher and check (or money order)", is postmarked by April 18. Make sure you make the check or money order payable to the "United States Treasury" and enter the primary taxpayer's Social Security number and the tax year in the memo section.

Paying with cash - There are a few IRS offices that will accept cash payments but check the listing for your local IRS office to determine if they are one. Keep in in mind you won't have the added security of a cancelled check if you ever need to prove that you made your payment.

If you cannot pay the full amount due, the IRS offers an Online Payment Agreement, which you can easily complete (can you guess where?) online. Installment agreements are automatically approved if you owe less than $50,000 in taxes and plan to pay it all off within 72 months. The IRS webpage, Payment Plans, Installment Agreements, provides details regarding the available options and indicates, "As long as you pay your tax debt in full, you can reduce or eliminate your payment of penalties or interests, and avoid the fee associated with setting up the agreement." If you don't want to do it online, you can also set up an installment agreement using a Tax Pro to complete Form 9465 and electronically file the form or mail it to the IRS (which takes longer to process). Installment agreements are worth checking into if you have a debt you owe to the IRS but you cannot pay right away.

Owing the IRS can be a costly matter, but it is completely manageable as long as you do manage it - don't put it off. So make sure you file your return or extension by April 18 and pay our taxes on time. Your tax pro can help you figure out which payment route is best and can help you examine your tax situation if, next year, you'd rather be one of the three out of four lucky folks that get a refund.