IRS may abide by the firm’s instructions to apply payments to its owners’ taxes, the Tax Court rules. A couple who owned a corporation didn’t file their personal returns or pay tax due.
After pleading guilty to tax crimes, they mortgaged their home and forwarded the proceeds to their firm, which sent money to the IRA on their behalf. Instead, the IRS applied the payments to the company’s large outstanding payroll tax debt, but the Court said that firm’s payment designation controls (Dixon, 141 TC No. 3).