IRS May Only Use ‘Deposit’ as Payment if Penalties Were Assessed

The IRS must figure out whether it satisfied a notice requirement concerning penalties against a taxpayer before it applied the money he sent toward the penalties, the Third Circuit ruled Friday.

In its opinion, the three-judge panel of the US Court of Appeals for the Third Circuit tossed out a 2021 US Tax Court ruling in favor of the Internal Revenue Service. The Tax Court concluded the IRS was permitted to apply the money from Faisal Ahmed to the penalties even though he had meant for the money to be used as a cash bond deposit that would freeze ...