Back in July, the Internal Revenue Service (IRS) issued a statement announcing that some 2021 tax return payments were not properly deposited into joint taxpayer accounts. This unfortunately resulted in incorrect CP14 balance-due notices being sent to unsuspecting taxpayers.
According to tax expert Bill Nemeth, the issue with these errors — most commonly occurring with married filing jointly (MFJ) couples — surrounds confusion related to an “unwritten rule” delineating primary from secondary taxpayers.
“They may get a CP14 which shows a balance due and includes a voucher which has the primary taxpayer’s information on it, which is supposed to go on their check (Social Security number [SSN], tax form, tax year),” Nemeth told Accounting Today.
“But if the taxpayer or spouse goes online to pay the balance, frequently the spouse who is second on the return will make the payment in their SSN because they were responsible for the balance due — for example, if the taxpayer is disabled and the spouse is working and therefore figures that she should pay the tax.”
When paying a balance due or an estimated tax payment, if the secondary taxpayer makes a payment in their name and SSN, the system may not accept it.
According to the IRS, conditions cause certain payments to get hung up and stopped from being transferred over to a married filing jointly account. Generally, reasons this can happen are when the payment is:
- Not electronic and is made by the secondary spouse.
- Electronic, is made by the secondary spouse, and posts before the joint return indicator is present to identify the primary taxpayer.
- Made by the secondary spouse using the Online Account (OLA) Make a Payment functionality.
Most accountants are aware of this flaw, but many taxpayers are oblivious to it because it isn’t explained in detail on the IRS site. For Nemeth, he learned all about incorrectly applied payments by the IRS first hand — when he was filing a MFJ return in 2000.
“I purposely had my spouse — second on the return — pay the balance online in her name and SSN,” says Nemeth. “The payment was not reflected on our joint account. I called the IRS as the primary taxpayer — first on the return — and explained the situation of the payment being made in the name and SSN of the secondary taxpayer.”
“The assister then researched the situation and moved the online payment to our joint account. I asked the assister if this is common. His reply was ‘It happens all the time.'”
A dreaded CP14 notice usually means that you owe the IRS money for unpaid taxes. It can also mean that you owe for interest and penalties that have accrued on those unpaid taxes.
Those who have erroneously received a CP14, but paid the tax they owed in full (and on time) don’t need to respond to the notice to pay. The IRS said it is researching the matter and will update those affected by this error as soon as it can. If any taxpayer is unsure if their payment was processed correctly, they can check their online account under the SSN that made the payment.
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