Whenever you are making a payment to any taxing agency you must remember to assign your payment, otherwise the agency has the legal flexibility to apply your payment in a way that benefits the agency, and not necessarily you. By assignment I mean that you are putting the agency on legal notice as to where to apply your payment.
Consider that you still owe the IRS $5,000 for last year and you are currently in an installment agreement with them to make monthly payments. To insure that you do not owe them anything this year like you did last year, you send a quarterly estimated payment or voluntary payment in the form of a $3,000 check. If that payment is not assigned, the IRS will automatically apply that payment to the oldest balance; which is last year. Then you file your 2017 tax return thinking everything is OK, and 6 months later receive a surprise in the form of an IRS letter penalizing you for not paying your taxes on time – and they want the $3K too.
The way to avoid these misapplications is to properly assign your payments. To do this, in the memo section of your check write your Social Security Number, the tax form, and the year; “SSN: XXX-XX-XXXX, Form 1040, Tax Year 2017.” Do this whenever you send a check to any taxing agency be it the IRS or your State’s Department of Revenue.
If you are making a payment on line, be certain to choose the correct form and period before making your payment.
If the person in our example was to write a letter and request that the IRS please apply the payment to 2017, the IRS would likely oblige, or they might not; it depends. It would be a lot easier to just assign your payments to avoid such pitfalls. You should also contact your licensed tax professional for a Voucher to include with any mailed check.