The IRS has broad discretion to allocate partial payments of back taxes. It can do so to its own advantage unless you state how to apply the payment, an Appeals Court says. A company owed the Service income and employment taxes. IRS also claims that the owner owed the 100% trust fund penalty for willful failure to deposit payroll taxes. The company made periodic payments on the tax debt, but didn’t specify which taxes the payments were for. So IRS applied the payments to the firm’s income tax debt, which kept the owner on the hook for a larger amount of payroll taxes. That allocation passed muster with the Court (Westerman, 8th Cir.).