Topic Number 206 - Dishonored Payments
Responding to Taxpayer Inquiries:
My check (payment) didn't clear. What now?
- At times, taxpayers will call the IRS because they received a Letter 608C, Dishonored Check Penalty Explained, stating that their payment was dishonored and returned from a financial institution unpaid. When this letter is sent out to the taxpayer, the check is determined to be unpaid and the IRS won't resubmit it for payment. The IRS doesn't submit checks or other commercial payment instruments a second time for payment.
- When a check or other commercial payment instrument isn't paid, however, the clearinghouse does frequently resubmit it to the bank.
- The clearinghouse, not the IRS, determines whether or not to resubmit a payment so the IRS doesn't know if the payment instrument will be submitted a second time or not by the clearinghouse. It's up to you to decide whether to wait and see if the clearinghouse resubmits it to the bank, or whether you should make an additional payment.
- If your check or other commercial payment instrument is resubmitted and there are sufficient funds in your bank account to cover it, the check will be paid and not returned to the IRS, so you won't be charged the dishonored check penalty. If the payment is honored after the due date, however, you may be charged interest and a penalty for the late payment. We'll notify you if a balance becomes due on your account.
How is the penalty calculated?
When a check or other commercial payment instrument the IRS receives for payment of taxes doesn't clear the bank, a penalty of 2 percent of the amount of the check or other commercial payment instrument generally applies. However, if the amount of the check or other commercial payment instrument is less than $1,250, the penalty is $25 or the amount of the check or other commercial payment instrument, whichever is less. Thus, if the amount of the check or other commercial payment instrument is between $25 and $1,250, the penalty is $25.
Requesting Penalty Abatement
The IRS can abate (remove) this penalty in certain circumstances. You may request penalty abatement by explaining why the payment was dishonored. You must make this request in writing and should only do it after you've received the Letter 608C notifying you of a penalty assessment.
A dishonored check penalty isn't assessed on checks or other payment instruments for which you placed a stop payment order. If you're assessed a penalty, please send a copy of the stop payment request along with your penalty relief request to the service center address listed on your Letter 608C.