How to Resolve IRS Payments Made to the Wrong Tax Period

If you accidentally make a payment for the wrong tax period, the IRS will apply any overpayments to tax periods with balances due and send you a refund of the remaining amount. 

But that only happens automatically if you make a payment on a closed tax year. If you incorrectly apply a payment to the current tax year, you must call and ask for the payment to be applied to an older tax period – and it's not always easy. With payroll taxes, you may need to file an amended return and ask for the payment to be credited to the correct tax period.

To get help dealing with misapplied IRS payments, contact a licensed tax professional today. Start your search on TaxCure so that you can easily find, research, and assess tax professionals. 

Key takeaways

• If you make a payment to the wrong tax period, contact the IRS and ask them to apply the payment to the correct tax period. 
• The IRS will automatically apply overpayments to balances due and send you a refund of remaining amounts – but only if the overpayment was on a closed tax year. 
• Taxpayers often make estimated payments for the current year when trying to pay taxes for previous years. 
• The Internal Revenue Manual (IRM) says not to apply estimated payments for the current year to other tax periods until the close of the tax year, unless there's an obvious IRS or taxpayer error. 
• A tax professional can help you contact the IRS to get the payment applied to the correct tax year. 

What if you overpay the IRS?

Under I.R.C. § 6402(a), if you overpay the IRS, the agency will apply the excess money to any other taxes you owe. They may also send overpayments to state agencies to cover unpaid state taxes, delinquent child or spouse support, or other debts handled through the Treasury Offset Program. 

For example, say you send the IRS a $10,000 payment for the 2024 tax year, but you only owe $2000 for that year. You also owe $7000 for tax year 2025. The IRS will apply $2000 to tax year 2024, $7000 to tax year 2025, and send you a refund of $1000.

To give you another example, say that you pay estimated taxes during tax year 2025. When you file your 2025 return, it shows a refund of $5000. However, you owe taxes for tax years 2018 to 2024. The IRS will not send you the refund – instead, they will apply it to your oldest tax liabilities. 

If you get a refund you were not expecting, you may need to return it to the IRS, but first, make sure that it's not a refund of a payment you made to the wrong tax year. Sometimes, the IRS just sends the money back if you don't owe anything for the tax period you applied the payment to. 

Overpayments for the current tax year

Unfortunately, if you overpay for the current tax year, the money may get stuck in limbo. According to I.R.C. § 6401(a), the IRS does not have to recognize an overpayment until the end of the tax year. So, if you overpay in the current year, the IRS does not legally have to refund the money or apply it to a different tax period. 

For example, imagine you make a payment in early 2026. The IRS processes the payment as a 2026 estimated tax payment, but you wanted the payment applied to your tax debt for 2025. Unless you can get the payment reapplied to the correct year, you'll likely receive collection notices about the 2025 balance, and if you don't make payment arrangements, the IRS may pursue involuntary collections, including filing tax liens, garnishing wages, or seizing assets. 

There are ways to rectify this error, but you must contact the IRS directly and convince them that an exception applies. 

What to do if you pay current year estimated taxes instead of back taxes

Taxpayers commonly pay the current year's estimated taxes by accident, instead of paying back taxes from a previous year. This may happen if you:

• pay online and select the wrong tax period or type of payment – for example, if you pay through your IRS online account or on the EFTPS website and select "estimated tax" instead of "return payment", or if you select the wrong year. 
• Mail the payment with the current year's 1040-ES vouchers – if your tax preparer gives you 1040-ES vouchers, they are for the current tax year, not the previous year. If you send in a payment for a previous year with these vouchers, it will be applied to the current year.

Unfortunately, the Internal Revenue Manual (IRM) says that these payments are not considered to be overpayments until the end of the tax year, and again, that means they cannot be reapplied to a previous tax year. But there are two exceptions: 

• The IRS processed the payment incorrectly. 
• There was an obvious taxpayer error.

Obvious taxpayer error is a subjective phrase, and some IRS employees may be reluctant to reapply payments. You may be able to convince the IRS that there was an obvious error if you called for a payoff amount, made a payment for that exact amount, but applied it as an estimated payment. An experienced tax professional can help you craft a compelling narrative to convince the IRS you made an error. 

The IRS will also refund estimated payments if you don't have an estimated payment liability – for example, you have never had to pay estimated tax payments in the past, or you don't have self-employment income. 

What if I make a payroll tax payment to the wrong period

When making payroll deposits on the EFTPS system, you must choose the type of return and the tax period from a drop-down menu. It's easy to make errors, but it can be hard to fix them. 

You may be able to make changes manually on the EFTPS website if it's at least two days before you scheduled the payment. Once the payment has been processed, you cannot make changes online, but you can call the IRS and ask them to reallocate the payment. 

If the IRS agrees to reapply your payment, watch your online account to make sure the payment gets applied to the correct period. If you don't see the update or if you get a notice from the IRS saying that you owe money for the period, you may need to amend your payroll tax return. 

How to amend payroll returns to fix payments made to the wrong period

If you overpay, you may be able to correct the problem by filing a 94X-X form for the period you made the overpayment. You can request a refund of the overpayment or ask the IRS to apply the credit to the quarter when you file the amended return. 

If you file the amended return in the last 90 days of a period of limitations, you can't have the tax applied to the current period and must request a refund instead. 

What does Letter 4870 mean?

This letter means the IRS couldn't process a payment on your payroll tax account. You may receive it because your bank returned the payment, you provided incorrect payment details, or due to an IRS error. 

Penalties for making payments to the incorrect tax year

There are no penalties for making payments to an incorrect tax period, but if you meant to make a payment on another tax liability, you may incur interest and penalties for that tax period. 

Say you try to make a payment for a previous tax year, but you accidentally make an estimated tax payment for the current tax year. The balance due on the previous tax year will incur a failure to pay penalty of 0.5% to 1% per month, up to 25%, plus interest that compounds daily. 

You may be able to get the penalties waived if you can prove that you made the payment to the wrong period in error or if you qualify for first-time penalty abatement. However, that's not guaranteed. 

What is an IRS misapplied payment?

A misapplied payment is when the IRS applies a payment to the wrong tax account, wrong tax return, or wrong tax period. The IRS will send you a notice letting you know about the misapplied payment. Misapplied payments may also refer to situations where taxpayers make payments on the wrong account, year, or return. 

IRS Notice CP260

Notice CP260 means the IRS has removed a payment that was incorrectly applied to your tax return. The letter explains how much you owe after the payment was subtracted from your balance due. 

For example, you may receive this notice if the IRS gave you credit for a payment made by another taxpayer, and they have discovered the error and adjusted your account. 

If you disagree with the notice, you should contact the IRS within 30 days. Otherwise, make arrangements to pay the new balance due. 

IRS Notice CP60

The IRS sends this notice if it removes a misapplied payment from your tax account. Again, you have 30 days to contact the IRS if you disagree with the notice. If you agree with the changes, contact the agency to make payment arrangements. 

What's the difference between CP260 and CP60?

CP60 says the IRS misapplied a payment to your tax account, while CP260 says the agency misapplied a payment to your tax return. 

FAQs about IRS payment errors

Have more questions? Then, keep reading for answers to common concerns, or reach out to a tax professional for customized advice today.

What should I do if I accidentally paid the wrong tax year?

Call the IRS and ask them to assign the payment to the correct tax year. The agency typically applies payments to the oldest tax liabilities – unless the payment is clearly designated for a different tax period. If you made the payment for the current tax year, the agency may not be able to reassign it to a previous tax year unless the IRS processed the payment incorrectly or if you convince the agency that you made an error. 

How does the IRS misapply payments?

The IRS may misapply payments in a range of different ways. For example, the IRS may incorrectly credit a payment to the wrong taxpayer or apply a payment to different tax liabilities than the taxpayer intended when they made the payment. 

How long does it take to correct an IRS payment error?

It depends. You may be able to correct a payment error over the phone in an hour or two, or you may spend months trying to repair the issue. The process takes longer if you have to amend tax returns or wait for IRS responses. 

Do I need Form 3911 to fix misapplied payments?

No, do not file Form 3911 about misapplied payments. You should only file this form if the IRS has issued a tax refund and you haven't received it. If you sent in a payment and the IRS has sent you a refund, you can use this form to follow up if you don't receive the refund. 

Can you get penalties removed for IRS errors?

The IRS will remove penalties if the agency made an error. For example, if you received incorrect advice from the IRS in writing, if the agency misapplied a payment, or in other cases of errors. 

Should I call or write to the IRS if I made an incorrect tax payment?

You can call or write to the IRS to address an incorrect tax payment. Be aware that the IRS is understaffed. If you call, you will almost always face long hold times, and you may get different answers from different IRS employees. If you write a letter, don't expect a response quickly, as processing time will be very slow. 

Get Help With the IRS Today

You don't have to deal with the IRS on your own. There are tax professionals who specialize in tax resolution. TaxCure makes it easy to find them – start your search on this page, use the filters to narrow down the results based on pros' experience, and then read reviews until you find the right fit. 

A misapplied payment can have a lot of unintended consequences, but a tax professional can help you figure out what to do and how to resolve the situation as effectively and quickly as possible.