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Resources:
Tax Education: Payment
of Back Taxes
If you don’t specify
how your tax payments are to be applied to past due taxes, the
IRS will apply the payment first to taxes, next to interest, and
last to penalties. The
IRS will also apply payments to the oldest years first.
This type of allocation
is usually not to your advantage.
For example, the period for collecting taxes may be about
to run out on the oldest years, so you may not need to pay them.
Or, if you are contemplating filing bankruptcy, perhaps
only the most recent tax year is not dischargeable.
Paying interest may
create a deduction on this year’s tax return.
Payment of a penalty may not be deductible.
To specify how you want
the IRS to apply your payment to a back tax, write in the
lower-left corner of your check or money order your social
security number, the tax year, and whether the payment is to be
applied to tax, interest, or penalty. Unfortunately, the
IRS routinely ignores these instructions.
Remember, when the IRS
levies your wages or bank account, it can allocate the payment
however it wishes.
For more
information contact us at taxhelp@taxdefendant.com
or
Toll Free 866-216-1930
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