Electronic IRS Payments

As I have explained on several occasions, I am not an advocate of electronic filing of Federal or State income tax returns because the format still does not allow us to add the additional documentation necessary to avoid audits. However, I am interested in learning about the IRS's system for receiving tax payments electronically. IRS just issued a press release touting its success, piquing my interest.

One of the most frustrating matters in dealing with IRS is the application of tax payments. I always advise clients to write their SSNs and the tax year on the face of their checks to try to ensure that IRS posts it to the correct year. Even when a check is being sent in to IRS along with a payment coupon or voucher, you need to assume that the check will go in one direction and the voucher in another. The check itself has to tell the complete story as to where it should be applied. Even with this information written on the front of checks, there are at least a dozen clients each year who have their payments posted incorrectly by IRS, normally to a different year than what was intended. This results in nasty-grams from IRS for the supposedly unpaid tax. While common sense would motivate most people to automatically look into other years for an equal overpayment, IRS has never been known to have any such intuition. It normally requires a lot of time working with IRS to track down missing payments.

What is critical in this kind of investigation is the back of the cancelled checks. IRS imprints some very tiny numbers on the back that usually identify where the check was applied. Without those checks, it's a guessing game. That is why it is important to use a bank that returns your actual checks rather than send you a photo-copy of the check's front, as more and more banks are doing.

I am researching this service myself. I have gone to their website and will sign up both as an individual and for one of our corporations. I am also very interested in hearing from anyone who has been actually making payments through this means, especially for an older year, where most misapplications happen. I will report on my findings.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 11/27/2002 09:32:00 PM Send this post: