Tax Payment Strategy

Today TaxMama hears from Kathy in the TaxQuips Forum with an interesting question.  “I thought I read somewhere that I could specify to which year’s taxes I want to apply my payments.  For example, if I owe taxes from 1996 through 1999 and then from 2006, I can apply my payments to the taxes due for 2006 first.  That way, I’ll be paying the newest delinquency while the collection statue continues on the older taxes.  Is that true?”

Dear Kathy,

I believe that you are correct.

Be SURE that each check you send shows specifically which year you are paying – and that you are paying taxes only. 

Also include a cover letter, which also specifies the information. Staple the letter to the check so IRS cannot cash the check without having separated it from the letter – the check copy will have staple marks.

 It may work. It cannot hurt to try!

 And remember, you can find answers to all kinds of questions about tax payments, and other tax issues, free. Where? Where else? At www.TaxMama.com.

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2 thoughts on “Tax Payment Strategy

  1. Pingback: Ask TaxMama Issue 606 The Amazon Bill and You

  2. Victoria says:

    Kathy is correct about being able to designate where her tax payments are applied. You do need to make sure your ssn, tax form and year that you are directing the payment to are in the memo box. Keep track of this as the payment may not be applied where you would like to see it go. You may always look up your account transcripts, account information, on e-services/ irs.gov in order to be sure your payments are going to the tax year you are indicating. This is a good resolution for you in that you are able to pay off the closest year first and hopefully, the statute of limitations will expire and your balances for the years furthest away will be written off.

    However, if you are in an Installment Agreement with the IRS, you may not do this and you may not choose where your tax refunds will go. Be aware of this important rule.

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