Did you know that the tiny little line on either your personal check or one issued from your bank is the determining factor in how your tax payments get handled? It’s true!
When filling out your check to pay your quarterly estimates or your taxes due with your return, it is imperative that the memo line indicate precisely what you are paying for. That memo line needs to specify the correct quarter, the correct tax year and your partial Social Security number.
If you pay using a bank issued check (via bill pay, for example), be sure to review what the hidden memo line says, as it may default to the previous memo used, or you may be entering the memo information into the wrong area.
If you pay online, be sure to choose the correct tax year and quarter.
What happens if the quarter or tax year is wrong? Well, the IRS will apply that money to a time period you have already paid for and then send you a letter saying you’ve overpaid. The IRS must apply the payment to the tax year you specify and if no tax year is specified at all, the IRS will apply it to the oldest outstanding tax debt. It sounds bizarre, but it is not an uncommon occurrence. That’s why the memo line is your best way to ensure that your payment is being applied to the tax year that you are intending.
We are, as always, here for you.