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How the IRS will work the case..
Payments on Trust Fund Accounts During approved In-Business Trust Fund Installment Agreements
1. When the Trust Fund Recovery Penalty is set up, more than one entity may be liable for the trust fund portion of liabilities. Therefore, when businesses enter into installment agreements the entities or individuals liable for the trust fund recovery penalty may prefer the taxpayer’s or corporate entities payments be applied to the trust fund portion of the balance due accounts. If this occurs, taxpayers should be notified that, in accordance with Treasury Regulation 301.6159–1(b)(1)(i): and this is a big one because a smart practitioner will try to make this happen:
1. Although voluntary, installment agreement payment application is governed by the terms of agreements.
2. As stated on the agreement form: The IRS “will apply all payments on this agreement in the best interests of the United States.”
3. Taxpayers are not permitted to designate installment agreement payments.
4. Installment agreement payments will be applied in the best interests of the United States, regardless of the policy to apply payments to all tax first then penalties and interest when dealing with trust fund modules.
2. Individuals who are potentially responsible for trust fund penalties should be encouraged to make payments from their own resources. These payments are not considered to be installment agreement payments.
3. Sometimes Revenue Officers will make exceptions and may allow payment to go to the trust fund liability.
4. It is best to let the Revenue Officer know of your intentions and why payment should go to the trust fund tax first.
