How to Designate Your Voluntary Tax Payments

This is a follow up to the earlier question of “can I designate how my tax payments are applied to my tax liability?”

Question:

I would like to make a payment on some back taxes that I owe. I want to make sure it is applied to the taxes and not the penalties or interest. Can I tell the IRS where to apply my payments?

Answer:

Last week I answered the question of whether you can direct how your voluntary tax payments are applied to your tax liabilities. The short answer is yes. This week we will look into the mechanics of exactly how you designate these payments. The first thing you need to do is to write your Social Security number or taxpayer identification number (if you are a business) on the memo line of the check. You should also write the type of tax and the year you want the check applied to. For example, “1040 income tax for 2005” if you want your payment designated to pay the 2005 income tax due from your personal1040 income tax return. You should also send a short cover letter clearly showing your name and address, Social Security number, payment amount, and the tax years you want the payment to be applied to. You should send this payment via Certified Mail return-receipt requested to insure that it is received by the IRS. If you don’t believe your tax payments were applied correctly you can request a copy of your account transcript that shows how all payments have been applied. Be sure to save copies of your checks, the letters, and all the return-receipts so you can prove the payments were sent and how you wanted them applied if the IRS misapplies a payment. If you have a tax problem, I would be happy to discuss your situation and tell you how I can help. Your initial consultation is free and you will be under no obligation. I also handle real estate, probate, domestic and personal injury matters.