Can I tell the IRS how to apply my tax payments?

Yes, you can. And you should. The IRS routinely misapplies payments.

In general, if you are behind on your income taxes, demand that the IRS apply tax payments to the most recent tax liability, and pay the recent tax balance before paying older liability. The reasoning is that the IRS’ right to collect older tax liability expires sooner than recent tax liability.

If you entered into an installment agreement, it’s best to have those payments taken out of your checking account. Or else payments that are supposed to be applied to an installment agreement may be applied to another tax.

Here are five steps to make sure the IRS always applies your tax payments properly:

  1. Always use a check or cashier’s check. No money orders. Make copies even if the bank provides a copy for you.
  2. Always note of the face of the check, and write legibly, your full legal name, social security number and the tax period for which the payment is to be applied.
  3. Always include a cover letter indicating what the payment is for and include the check number, your full legal name, and social security number on the cover letter. If you are paying at the time you are filing your tax return, include Form 1040-V, Payment Voucher to make sure payments are applied correctly.
  4. Always make separate payments using separate checks for separate tax accounts. And use a separate cover letter for each separate check. Send each check and cover letter separately by mail. For example, if you are sending two payments and two cover letters, send two separate mailings, each by Certified Mail, with return receipt requested.
  5. Always mail by certified mail with return receipt requested.

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