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:
As long as you are making a voluntary payment, meaning your bank account has not been levied or your wages have not been garnished, you can designate how your payments will be applied to your tax liability. Now, where do you designate the payments? If you do not designate where to the apply the payments, the IRS will apply the payment to the oldest tax due first. This is not always in your best interest.
I would recommend that you designate your payments to the newest tax debt. This is because the IRS has ten years from the date of assessment of your taxes (usually April 16th the year taxes are due, if you file on time) to collect these taxes. Therefore, the older taxes will be wiped away more quickly than the new taxes. Also, if you are contemplating bankruptcy, older taxes are generally easier to discharge than newer taxes.
Very soon, I will discuss how you go about designating your tax payments. 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.
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