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Current IRS Tax Map

Rev. date: 09/2008


Dishonored Payments

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Dishonored Payments

Tele-Tax Topic 206
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Responding to Taxpayer Inquiries:
My Check did not Clear. What Now?
How is the Penalty Calculated?
When checks or money orders the IRS receives for payment of taxes do not clear the bank, the bad check penalty generally equals 2 percent of the amount of the check or money order. If, however, the amount of the check or money order is less than 1,250.00, the penalty is $25.00 or the amount of the check or money order, whichever is less. Thus, if the amount of the check or money order is from $25.00 to $1,249.99, the penalty is $25.00.
Request Penalty Abatement
The Internal Revenue Service can abate the bad check penalty in certain circumstances. You may request penalty abatement by providing a reason why the payment was dishonored. This request must be made in writing and should only be done after you have received notification of a penalty assessment.
Stop Payments
Generally, bad check penalties are not assessed on checks for which a stop payment order has been requested. If a penalty is assessed, please send a copy of the stop payment request along with your request for penalty relief to the address on the notice.
Electronic Funds Transfer and Payments made by Other Than Check or Money Order
Payments made through the Electronic Federal Tax Payment System (EFTPS), and payments made by other than check or money order for which there are insufficient funds are generally not assessed a bad check penalty. If a penalty is assessed, please respond in writing to the address on the notice you received regarding the penalty. If the payment is made late there may be a penalty for failure to deposit and/or failure to pay tax timely.