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Surprise the IRS has broad discretion to allocate partial payments of back taxes. It can do so to its own advantage versus your, unless you state how to apply the payments.

In a recent tax court case a couple who owed multiple years of income taxes hand-delivered a check to IRS and designated it for payment of their 2009 taxes.

But before depositing the check, the Service levied the couple’s bank account and applied the proceeds to taxes owed for earlier years. That levy then caused the check for the 2009 taxes to bounce.

The couple claimed they made a voluntary payment when they gave the check to IRS and that IRS should have applied the levy proceeds to 2009. The Tax Court disagreed, saying a check is not a payment until accepted by the bank.

So use caution when a levy is in place, think about a certified or cashier’s check.

Melasky, 151 TC No. 9

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