PAYING BY CHECK: WHAT YOUR CLIENTS SHOULD KNOW
The IRS encourages electronic payment of any tax due whether it be estimates through EFTPS or Direct Pay at irs.gov or a tax liability on the individual tax return. If the taxpayer still insists on making payment by check or money order then following are some items to note.
Pay Treasury, not IRS: Make your check or money order payable to United States Treasury, not IRS. That's because the IRS is just the collector. The Treasury is the government's finance department. Also, if you write IRS on the pay to line, a crook who steals your tax mailing could more easily alter those three letters, for example putting periods after the I and R and making the S the start of a full surname, and fraudulently cash the check.
Include your complete information: Show your correct name, address, Social Security number, daytime phone number, and the tax year and form number (for most of us this time of year, that's Form 1040) on the front of your check or money order. If you are filing a joint return, enter the Social Security number shown first on your tax return.
Leave the check loose: Do not attach the payment to your return. Just drop it in the envelope. The IRS is going to rip it off anyway, as it deposits your payment before it processes the paper return you filed.
Use a payment voucher: The IRS recommends you also enclose a Form 1040-V payment voucher to help ensure your payment gets credited promptly.
Remember your check and return are separated once they reach the IRS. The voucher will help connect your payment to your return and IRS account.
The voucher is also handy if you file your return early, but do not send in the payment with the return. You can send your 1040 and payment at different times. That happens most often when folks get an extension to file. But there's no extension to pay. So, get your check (and voucher) to the IRS by, this year, April 18.
The IRS also has a couple of things it wants you to know about your check payment: Conversion to electronic payment: Despite payment by paper, your check ultimately will be an electronic transaction. The IRS says when you provide a check as payment, you authorize them either to use information from your check to make a one-time electronic fund transfer, or EFT, from your account or to process the payment as a check transaction.
That means there is no check float. When the IRS uses your check information to make an EFT, your payment amount may be withdrawn from your account as soon as the same day the agency receives your payment. Therefore, make sure you have the money in your account. And note that the electronic conversion means you will not receive your check back from your financial institution.
Bad check fees: If your paper payment to the IRS bounces, the agency assesses a fee of $25 or 2 percent of the check, whichever is more.
Finally, there are special considerations for folks who owe very little or a whole lot.
Less than $1 due means no payment required: As the IRS tip from Publication 17 (and shown below) notes, you do not have to pay Uncle Sam if the tax amount you owe is less than one dollar.
Limit on $100 million checks: If, however, your tax due exceeds $100 million, you are going to have to write more than one check. The IRS will not accept checks of $100 million or more. From the Form 1040 instructions:
“No checks of $100 million or more: The IRS can't accept a single check (including a cashier's check) for amounts of $100,000,000 ($100 million) or more. If you are sending $100 million or more by check, you'll need to spread the payment over two or more checks with each check made out for an amount less than $100 million. This limit doesn't apply to other methods of payment (such as electronic payments). Please consider a method of payment other than check if the amount of the payment is over $100 million.”