Heidi Adams

Keeping up with federal tax payments is a critical part of maintaining both personal and business financial health. IRS Direct Pay offers a free, secure, and convenient way to pay federal taxes directly from your bank account—whether you are managing business tax obligations or an individual return.

Below is an overview of how IRS Direct Pay works and how it can benefit both businesses and individuals.

What is IRS Direct Pay?

IRS Direct Pay is an online service provided by the Internal Revenue Service that allows taxpayers to make federal tax payments electronically from a checking or savings account. The service does not require registration or advance setup, making it a straightforward option for one-time or recurring payments.

How Can Businesses Use IRS Direct Pay?

Businesses can use IRS Direct Pay for a variety of federal tax payments, including:

• Balance Due Payments – Pay amounts owed on annual tax returns such as Forms 1120, 1065, 720, 940, 941, 945, 1042, and other business filings.
• Estimated Tax Payments – Submit quarterly estimated payments to help avoid underpayment penalties.
• Amended Return Payments – Pay additional tax due from amended tax return.
• Installment Agreement Payments – Make payments under an existing IRS payment plan.
• Extension Payments – Pay expected taxes owed when filing for an extension.
• Trust Fund Recovery Penalties – Submit payments related to trust fund recovery assessments.

How Can Individuals Use IRS Direct Pay?

Individuals may use IRS Direct Pay for common tax situations, including:

• Individual income tax payments for Forms 1040 and related filings
• Estimated tax payments for quarterly obligations
• Amended return payments for additional tax due
• Installment agreement payments on an IRS payment plan
• Extension payments when requesting additional time to file
• Other personal federal tax payments, such as advance or supplemental payments

Key Features & Benefits

• Free to use – No convenience or processing fees
• Secure – Bank information is encrypted and not stored by the IRS.
• No registration required – Available for immediate use
• Real-time confirmation – Receive instant payment confirmation
• Flexible – Schedule payments up to 30 days in advance; cancel or modify if needed
• Record-keeping support – Confirmation numbers provide proof of payment

How to Use IRS Direct Pay

1. Visit the IRS Direct Pay webpage
2. Verify your identity using information from a prior tax return
3. Select the appropriate payment type and tax form
4. Enter your bank routing and account number
5. Review and submit your payment, then save your confirmation number

Limitations to Keep in Mind

IRS Direct Pay is a helpful tool, but it does have some boundaries. Before using it, be aware of the following:

• IRS Direct Pay is not available for Trust or Estate payments.
• Users are limited to five payments within a 24-hour period.
• IRS Direct Pay does not accept payments of $10 million or more.
• Payments cannot be made from foreign bank accounts that lack a US affiliate.
• Don’t use IRS Direct Pay for individuals if your spouse’s name was listed first on a jointly filed return, but you were assessed a separate amount for that same tax year.
• Taxpayers who have never filed a return, or who have not filed in more than six years, must use a different payment option.

Best Practices

• Verify all tax and bank account information before submitting any payment
• Keep your confirmation numbers for your records
• Schedule payments ahead of deadlines to help avoid penalties
• Consult your accountant or tax advisor if you are unsure which payment type to select

Final Thoughts

IRS Direct Pay is a reliable and efficient tool that helps both businesses and individuals stay current on their federal tax obligations. Whether you are making estimated payments, paying a balance due, or managing an installment agreement, this service can simplify the payment process.

If you have questions about which payment option is right for your situation—or would like assistance planning your tax payments—our accounting team is here to help.

This article is provided for general informational purposes and does not constitute legal or tax advice.

Beginning with the 2025 tax year, the One Big Beautiful Bill Act introduced a new federal income tax deduction for certain overtime earnings. While the law does not change payroll or wage‑and‑hour requirements, it does create new reporting considerations for employers and new tax opportunities for employees. Understanding how overtime must be tracked and reported is now essential to avoid compliance issues and missed deductions.

1. What Counts as “Qualified Overtime”

Under the Act, employees may deduct qualified overtime compensation from their federal taxable income for tax years 2025 through 2028. This only applies to the FLSA-required premium portion of overtime (the extra ½ in “time-and-a-half”).

What does not qualify:

• Straight‑time wages for overtime hours (the TIME in “time-and-a-half”).
• Overtime paid solely due to:
  • State law requirements (e.g., California daily overtime)
  • Collective bargaining agreements
  • Employer policies or bonuses
  • Shift differentials, holiday premiums, or weekend pay

Only the FLSA‑mandated premium portion may be reported as qualified overtime.

EXAMPLE: If an employee with a $20 regular rate works 10 OT hours, they’re paid $30/hour for those hours.  The qualified portion is the extra $10/hour x 10 hours = $100.  The $20/hour “straight-time” piece for those hours is not deductible.

Caps and phase-outs apply: Up to $12,500 for single filers or $25,000 for joint filers each year, subject to income phase-outs (begin at $150,000 single / $300,000 joint.)

2. Payroll Withholding Remains Unchanged

Despite headlines about “no tax on overtime,” employers must continue normal withholding for federal income tax, Social Security, and Medicare taxes on all overtime wages; employees claim the deduction later on their returns. State and local taxes also continue to apply.

3. Track FLSA Overtime Separately

Because only the FLSA-mandated premium portion qualifies, employers should adopt clear internal tracking procedures to distinguish between:

• FLSA-required overtime premiums; and
• Non-qualifying premiums (e.g. daily overtime under state rules, contract premiums, shift differentials).

For employers with multi‑state operations or union agreements, this step is especially important.

4. W-2 and Year-End Reporting (Transition Relief)

For 2025 wages reported in January 2026, the IRS has allowed temporary reporting flexibility:

• Employers may, but are not required to separately list qualified overtime on Form W‑
• If not included separately on the W‑2, employers must provide a separate statement to employees showing deductible overtime.

Starting with future tax years, the IRS plans to update Form W‑2 to require separate overtime reporting.

Best practice: Provide a clear annual statement of qualified OT even if W-2 fields are not yet revised, so employees can accurately claim the federal deduction. We have provided a draft template that you are welcome to download and use for your employee statements.
[Download W-2 Employer Statement Template]

5. Communicate Clearly With Employees

Proactively explain that:

• The federal deduction applies at filing time (refund or balance due impact), not on paychecks.
• Only the FLSA premium qualifies
• There are annual caps and income phase-outs.

This reduces confusion and helps prevent under-withholding or inflated expectations.

6. Maintain Supporting Records

Both employers and employees should retain:

• Time cards and payroll registers that identify FLSA-qualified overtime separately;
• Any separate employee statements for 2025;
• Pay stubs and regular-rate calculations supporting qualified amounts reporting.

Good recordkeeping is essential if the IRS requests support for a claimed deduction.

West Virginia-Specific Considerations for Employers

While the rules above apply nationwide, state tax and wage laws can influence how overtime is treated locally.

West Virginia Income Tax Treatment

West Virginia does not conform to the federal overtime wage deduction created by the Act.

Overtime pay remains fully taxable for West Virginia personal income tax purposes.

Employers should continue to withhold WV income tax on all overtime wages, even if a portion may be deductible on the employee’s federal return.

Client tip: Employees may notice their federal and WV taxable income differ—set expectations in year‑end communications.

Overtime Law Alignment with Federal Rules

WV overtime mirrors the FLSA: 1.5× after 40 hours in a workweek; no daily overtime rule.

Because WV follows the federal framework, most overtime that qualifies under the FLSA in WV will also count as qualified overtime for the federal deduction.

Employer Coverage Thresholds

WV’s overtime statute generally applies to employers with six or more employees, but federal FLSA coverage can still apply to smaller employers depending on business activities. Review both state and federal coverage when evaluating obligations.

No State‑Specific Premiums That Complicate Reporting

WV does not impose additional premiums (e.g., daily OT, double‑time) beyond FLSA minimums, so payroll configurations for federal reporting typically work as‑is for WV employees.

Legislative Watch

A bill has been introduced that would exempt certain tips and overtime from WV personal income tax, but no such exemption is currently in effect. Continue current withholding until any change becomes law.

Final Takeaway

The One Big Beautiful Bill Act presents a valuable federal opportunity for workers—but only if overtime is tracked, reported, and documented correctly. For employers, the priority is accurate payroll classification and clear communication. For employees, the key is understanding eligibility and keeping documentation. At the state level, West Virginia still taxes overtime in full, so withholdings should continue unchanged even as employees may claim a federal deduction at filing time.

Need help? Our team can review your payroll setup and year‑end employee statements to ensure compliance and help your workforce capture eligible federal deductions.

This article is provided for general informational purposes and does not constitute legal or tax advice.