When it comes time to send the IRS some dough, folks need to carefully consider their situation and circumstances, relative to whether what they send is actually a payment of tax, or a mere “deposit.”
When IRS receives the money, it has to decide to classify the receipt as one or the other. If a remittance is determined to be a “deposit,” it is treated as a cash bond, which IRS merely holds, and a taxpayer may seek a refund of the deposit at any time.. But if a remittance is deemed a payment, the taxpayer may only recover the money by timely filing a claim for refund.
In determining whether a remittance is a deposit or a tax payment, courts apply a facts and circumstances test, which particularly includes the taxpayer’s intent in remitting the money.
Check out the recent decision in Leone Syring v. U.S. for how this works, and what happens when the taxpayer doesn’t dot the I’s and cross the T’s.