10. DIRECTION OF PAYMENTS
§ 5:52 In General
One method of reducing the potential trust fund liability is to assure that the employer designates each payment made on account by placing a restrictive endorsement on the back of each check worded as follows:
“Direct to Trust Fund Portion of taxes only for the period ended for Corporation.” [IRM 5.7.7 & IRM 8.11.2]
§ 5:53 Designated Payments
The Internal Revenue Manual directs that the Service will follow the taxpayer’s direction of payments and states as follows:
“A designated payment is a voluntary one that the taxpayer has directed to be applied in a particular manner; i.e., a specific period, kind of tax, tax portion, interest, etc. Normally such direction will be followed by the Service.” [IRM 5.1.2.3]
§ 5:54 Contemporaneous Direction
The courts have consistently held that a designation made contemporaneously with a payment must be applied by the Internal Revenue Service in accordance with such direction. Therefore, if you make a designation on the back of the check, the entire amount must be applied toward the trust fund portion. The direction must be written, and the IRS need not honor an oral direction. Read More
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