The Internal Revenue Service will only submit a check or money order for payment once. If your bank returns the payment for insufficient funds, you can send a replacement payment immediately, wait to see if the clearinghouse responsible for processing the check resubmits it or wait until the IRS issues Letter 608C, Dishonored Check Penalty Explained, telling you the payment was returned unpaid.
Although you may be responsible for penalty fees and additional interest for a late payment, there will be no bounced check penalty if a replacement payment reaches the IRS before the bounced check returns or if the check clears after the clearinghouse resubmits it. However, if you take no action until after you receive Letter 608C, a bounced check penalty fee will also apply.
Bounced Check Fees
The amount of the check determines the size of the penalty. At the time of publication, there are two penalty tiers:
- For checks up to $1,249.99, the penalty fee is $25 or the exact amount of the check, whichever is smaller. For example, you'll pay a $10 fee for a $10 bounced check and a $20 fee for a $1,000 bounced check.
- For checks of $1,250 and higher, the penalty fee is 2 percent of the amount of the check. If a $3,000 check bounces, you'll pay a $60 bounced check fee.
The IRS does not assess bounced check penalties on checks returned due to a stop payment order or on electronic payments drawn from accounts with insufficient funds. If you get a nonpayment letter, you can send a request for penalty relief letter if you can provide a good reason for the check bouncing, such as a bank error or direct payroll deposit delay. Send the letter along with supporting documentation to the address on your notice.