Dishonored Check Penalty

 

The Dishonored Check Penalty applies if you don’t have enough money in your bank account to cover the payment you made for the tax you owe. Your bank dishonors and returns your bad check or electronic payment and declares the amount unpaid.

How You Know You Owe the Penalty

We send you a notice if you owe the Dishonored Checks Penalty. For more information, see Understanding Your IRS Notice or Letter.

How We Calculate the Penalty

We calculate the amount of the Dishonored Check Penalty based on the amount of the bad check or electronic payment.

Bad Check or Electronic Payment Amount Penalty
Less than $1,250 The payment amount or $25, whichever is less
$1,250 or more 2% of the payment amount

Interest on a Penalty

We charge interest on penalties.

The date from which we begin to charge interest varies by the type of penalty. Interest increases the amount you owe until you pay your balance in full. For more information about the interest we charge on penalties, see Interest on Underpayments and Overpayments.

Pay a Penalty

Send us a payment or pay your taxes in full to stop future penalties and interest from adding up.

Remove or Reduce a Penalty

We don’t charge this penalty if you made a payment in good faith and with reasonable cause to believe there was enough money in your bank account to cover the payment.

Follow these steps if you want us to remove or reduce your penalty:

  1. Send us a written statement explaining why you believe we should reconsider the penalty.
  2. Include any documents that show there was enough money in your bank account to cover the payment. Documents may include a bank statements or a letter from your bank or agency that processed your payment.
  3. Sign and date your written statement and mail it to the address on your notice.

We will review your written statement and let you know if we accept it as reasonable cause.

Dispute a Penalty

If you disagree with the amount you owe, you may dispute the penalty.

To dispute the penalty because your bank dishonored your payment in error, send us a letter explaining why you believe we shouldn’t charge the penalty. Include with your letter your payment for only the amount of the payment you owe.

Have this information when you call or send your letter:

  • The notice or letter we sent you
  • The penalty you want us to reconsider (for example, a 2020 Dishonored Check Penalty)
  • For each penalty, explain why you think we should remove it

If you didn’t receive a notice or letter, get telephone assistance.

Avoid a Penalty

You can avoid a penalty by keeping enough funds in your bank account to cover your payment.

Apply for a Payment Plan

If you can't pay the full amount of your taxes or penalty on time, pay what you can now and apply for a payment plan. You may reduce future penalties when you set up a payment plan.

Get Help

For help with a penalty, call the phone number on your notice or letter. If you didn’t receive a letter or notice, use telephone assistance.