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.

Call us immediately for help.

For more information: taxhelp@taxdefendant.com

or

425-259-9363