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Estimated Tax Payments...It's all in the memo

Question…What is the most important part of your estimated tax payment check? The amount of money you are paying, correct? Nope! It’s actually the memo. Being sure to include the correct SSN and tax year is vitally important.

Memo: “2016 Form 1040-ES, 111-22-3333”

The tax year – As simple as it may seem, be sure to include the correct tax year in your check memo. This is especially important when paying your 4th quarter estimated payment in January for the prior year. You need to list the tax year you want the payment applied to. The IRS can make it challenging to change the tax year once they have applied a tax payment.

The SSN – The IRS tracks a married couple by the primary taxpayer’s SSN. This is the person listed first on the tax return. Usually it is the husband. You must include the primary taxpayer’s SSN in the check memo so the IRS will credit the estimated tax payment to the correct account. This is true even if the estimated tax payment is for the spouse’s income.

Example – Alan and Hazel Smith file their tax return jointly and Alan is listed as the primary taxpayer on their tax return. Alan is paid as a W-2 employee and withholding is taken from his bi-weekly paycheck. Hazel is self-employed for 2016 and needs to submit quarterly estimated tax payments to pay the tax due on her earnings. When Hazel writes her 4th quarter check to the US Treasury in January of 2017, she must include the following in the memo of her estimated payment check: “2016 Form 1040-ES, Alan’s SSN”

Even though the payment is being made in January of 2017, 2016 needs to be listed as the tax year. Alan’s SSN is listed even though the Smith’s owe estimated tax payments because of Hazel’s income. The IRS tracks The Smith’s, as a taxpaying couple, based on Alan’s SSN.

Have you messed up your check memos in the past? Not to worry! Sometimes the payments are automatically credited to the correct account. We can assist you in contacting the IRS to verify payments and if needed, we can request payments be moved that have been recorded incorrectly.

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