3.) Make a formal acceptance or refusal when you’ve made your decision.
The best way to accept or refuse a job is by phone. You don’t need to be fancy, just say something simple like (if accepting), “Thank you for the offer and for the opportunity. I accept and can’t wait to start.” If you’re refusing the job, then be upfront about your reasons and ready to negotiate. As long as you’re professional, you may get a better offer or at least enough goodwill to try again if it turns out you need that job.
As far as negotiations go, know that you won’t “lose” the job if you ask for more money or benefits. They might say they can’t offer it, but you can still take the job under the original conditions. So don’t feel you have to accept a substandard offer.
But remember you’ll have a lot more leverage in negotiations if you explain why you need what you’re asking for. You could cite your commute, or explain that what they offer won’t cover your expected health premiums. If they offer you a position, and you think you deserve something with a little more responsibility, you can ask for it. The worst thing they can say is no.
If you have been communicating by email, or through a web portal (which is common in federal jobs), you can respond electronically. It’s always better to talk to a person, however, and it’s always nice to follow up with an email. A written acceptance or refusal should be just as short and sweet as the verbal one, by the way.