We all know that the IRS has a ton of responsibility and processing to do, so when you mail in your tax payment check, there is often a delay before it clears in your bank account. If you forget about the check that you’ve submitted or if something unforeseen happens and you do not have enough money in your account to cover the check when it is presented for payment, the check will be returned to you unpaid. So what do you do?
Bouncing a check to the IRS may seem like a scary thing, but there is no need to get nervous. These things happen, and the IRS will not show up on your doorstep–that is, as long as you take care of it right away.
If you bounce a check to the IRS, they will notify you with a letter titled “Letter 608C–Dishonored Check Penalty.” However, your bank will probably notify you before you receive the letter from the IRS. As soon as you are notified, you will need to determine what to do about it – and, hopefully, you have the money to cover both the original payment amount as well as the penalty.
Determine Whether to Resubmit the Check to the IRS
Sometimes when a check is returned for non-sufficient funds (NSF), it is resubmitted for a second chance at clearing so as soon as you are notified that your first check bounced it is best to get the sufficient funds into your bank account to cover the check as soon as possible. The IRS does not resubmit checks, but the clearinghouse that your bank uses might. You can check with your bank to see if the check will go through a second time, or you can wait a week or so and watch your bank account carefully. You should also find out if a fee will be assessed when the check is presented the second time in order to ensure that there is enough money in the account.
If the check does clear the second time, it will not be considered a bounced check and will therefore not incur an NSF penalty. If your check is not resubmitted, you will need to send in a new one that includes the penalty amount.
Calculating the IRS Penalty for a Check Bouncing
There is always an NSF fee applied to bounced checks, and the IRS is no exception, so make sure that you include the penalty amount in your resubmitted payment. The penalty amount is calculated as follows:
- If the check is less than $1,249.99, the penalty is either the amount of the check or $25, whatever is the smaller amount.
- For checks of $1,250 or more, the penalty is 2% of the check amount.
If there are mitigating circumstances (such as a bank error), you can ask the IRS to waive the penalty. Provide the reason as to why the check didn’t clear in writing, and the IRS will consider it and let you know their decision. If you stopped payment on the check, that may be considered a mitigating circumstance, so be sure to explain to the IRS your reason for doing so.
In addition to the penalty, you may also owe late fees for not paying your taxes on time – a dishonored check is not considered an on-time payment. Late fees range from .5% to 1% of your tax for every month that the payment is late.
If you have questions about the penalties and fees or about how best to resubmit your check, call the IRS at 1-800-829-1040.
A bounced check to the IRS is not the end of the world, but it does require prompt attention. Once you determine for sure that the check will not go through a second time, calculate your penalty and resubmit your payment quickly to avoid additional penalties or fees.