Estimated Tax Payment Disaster

Two brothers own a profitable S corporation (60/40). They typically make no personal estimates during the year but make large extension payments (and pay underpayment penalty). For 2018, they decided to make a 4th quarter estimate around March of 2019. We prepared the estimate vouchers and the brothers mailed the vouchers with checks. The 2018 returns have been filed claiming the payments of $150,000 and $100,000.
It has come to light that the vouchers we provided were for 2019, not 2018. It was an error. The IRS is billing the taxpayers for the $250,000 (combined) plus lots of penalties and interest. I contacted the Practitioner Hotline today and was told there is nothing that can be done to move the payment from the 2019 account to the 2018 account because the voucher was for 2019 and the taxpayers indicated 2019 Form 1040-ES on their checks.
Of course, this is a big problem. I am certain it has to have happened before. Has anyone had a similar experience? Do these taxpayers really have to come up with another $250,000 and wait til 2020 to possibly have their money refunded? I considered contacting the Taxpayer Advocate, but, I am not really sure if that would help.

Bad news. According to this memorandum from the Office of Chief Counsel, the IRS does not have the authority to transfer a mistaken "Year 2" estimated payment to "Year 1".

Thanks MSchmahl. That is definitely on point. And NOT good news.

Contact Ken Mullinax. It's not over until he says it's over.

This is a post from anoter blog, about a year ago.

Long story short, I was self-employed, and had a great year. Last minute tax payment, I selected "estimated tax" instead of "tax return," and paid the 19000 i owe for 2017, as advance pay for 2018. Now the IRS is saying I still owe it the 19000 plus fees and interest, and they can't transfer the payment between years. Is this true? Do I have to wait for my 2018 tax return to get my money back? I'm not self-employed anymore, so I won't be paying nearly as much in taxes at the end of next year. Please help! And thank you.
UPDATE: The first guy I talked to said there was no way to fix it. I called the exact same number today, got a guy with more experience, and he transferred the balance in about 5 minutes: no argument, no hassle. I took care to use the words "obvious taxpayer error" since its in their manual, as Thrwayaway001 pointed out.

Thank you Nilodop. I looked at several pages of IRM hoping to find something, but that post you referenced had a comment that quoted but did not cite the IRM. But I was able to finally find it at https://www.irs.gov/irm/part21/irm_21-0 ... 8672593872:

(3) Taxpayer requests to apply current year estimated tax payments to a previous year's outstanding tax liability cannot be honored. [...]

Exception:
Obvious taxpayer errors, such as AMS history shows the taxpayer called for a payoff amount and that amount posted as an ES payment.

Okay, this is a real bitch. A few things…

I think it can be changed if you get the right person. Call the hotline a few more times until you get someone willing to do it. If that doesn’t work, call the regular IRS line a few times. If that doesn’t work, contact the taxpayer advocate’s office.

This is one of those things that the IRS can administratively change, IMO. There is ample evidence of that in Post #5.

From a legal standpoint, we might be able to liken the situation to an overpayment credit, that the taxpayer elects to have applied to the following year. But lo and behold, turns out, he needs the cash, so he wants to change his mind. The legal authorities tell us that this cannot be done. See RR 77-339, for example. One important comment in that RR is this:

See also section 6513(d) of the Code which provides that the overpayment becomes a payment on account of estimated tax for the succeeding year when it is credited.

You see, the minute an overpayment is credited to the following year, it is no longer an overpayment, which is a point that’s been made in other threads. Instead, what was an overpayment is now treated as an estimated tax payment for the following year. To me, this is not a lot different than your situation. In both cases, what we end up with is an estimated tax payment being credited to some given year. Per RR 77-339, there’s no going back, right? Not necessarily. As some of you may know, the IRS has reserved discretion to allow an overpayment election to be subsequently changed. See the PMTA below. And this stuff is actually in the IRM.

https://www.irs.gov/pub/lanoa/pmta01813_7432.pdf

In short, if we have an overpayment that’s already been credited to the following year, which is statutorily to be treated as an estimated tax payment for the following year, but the IRS allows us a do over…I see no reason why the IRS can’t allow a similar do over with respect to an actual estimated tax payment check that was mailed in.

Update: Again, thanks for the comments and advice. Jeff - you were right! I called Practitioners Hotline again this afternoon. Long story short, the agent moved the tax payments from 2019 to 2018. He told me that he could see that the taxpayers claimed the payments on their returns and, based on that, he was able to move the payments!

YAY!!!!

Jeff - you were right!

The story of my life!! LOL. I was just following JR1 and Nilodop’s lead…

Glad you were able to get it fixed. Hats off to you for your perseverance and, importantly, to the IRS for working with you to make things right.

It's five o'clock and the refrigpbrerator is stocked.
Congratulations!! Where should I email your brew?
Oops, my copier-machine won't teleport tangible property. I toast your success with the estimated payment(s) nonetheless.

Since there were two taxpayers, I'll drink two PBRs.

When all else fails make another call. A few years ago when the IRS was in crisis (calls dropping, hold times hours, emails lost, etc.) I had the exact same experience. The rep was so nasty I was really tempted to report her. Alas, I did not have time. Didn’t call back either. This year a different client made the payment on-line for 2018. Apparently, if you aren’t real careful the system will default to the current year. Anyway, I called the hotline. Got the nicest rep, moved the payment in about 30 seconds, no questions or second guessing or lecturing just did the job.