The Income Tax Department is a government agency tasked with collecting direct taxes from taxpayers. The agency is a part of the Ministry of Finance and functions under the Department of Revenue. The Central Board of Direct Taxes heads the department.
Earlier, taxpayers had to stand in long queues at designated banks to pay their taxes. However, the government has introduced a new e-payment system to make the payment process hassle-free and easy. Several banks have been directed by the Central Board of Direct Taxes (CBDT) to switch to the new Direct Tax Payment System.
The new e-payment system is also applicable to companies. To make an e-payment, all companies must have a net banking-enabled account in an authorized bank.
To pay income taxes online, the first step is to log in to the official website of the Income Tax Department. Then, fill in the required details. After completing the procedure, the taxpayer can verify the details. This process is very reliable and time-saving.
During busy times, the service may be slow. But it provides reliable proof of the successful tax payment. In addition, the confirmation receipt can be printed for further reference.
The second step is to select the preferred mode of payment. The choice of payment is usually based on the type of tax. For example, a taxpayer can choose from Individual Income Tax, Self-Assessment Tax, or Corporation Tax.
After selecting a mode of payment, the third step is to enter the personal and payment information. The details include the taxpayer’s bank name, the tax assessment year, and the payment type. This information is essential to complete the process successfully.
Penalties for underpayment
Whether you’re paying your taxes by the end of the year or are just a little late, the IRS will charge an underpayment penalty if you aren’t doing it right. While it may seem like the IRS is charging you a ridiculous amount, there are ways to avoid it.
Typically, underpayment penalties are capped at a certain percentage. For example, if you pay less than 90% of your total tax owed, you’ll owe an extra 5% on the remaining balance.
For example, you might be eligible for a penalty break if you have unpredictable income. If you earned $8000 in the first half of the year and only $500 in the second, you could be eligible for a minor underpayment penalty. Your pay depends on your income and how much you withhold.
There are several forms to determine how much you owe. In addition to the standard 1040, you may also need to complete Form 2210. The document contains a short method of calculating your underpayment. The maximum penalty is 25 percent of the unpaid balance.
The IRS will calculate the tax penalty for you. They will use a mathematical formula to calculate your underpayment. They will then send you a bill. You can pay the bill or contact the agency to discuss your options. It’s good to write down the date and time you call.