If Your Tax Check Bounces, The IRS Will Assess You a Penalty

People bounce checks all the time, for various reasons: the payment you deposited into your account didn't clear on time; your spouse wrote a check at the same time you did, drawing on the same pool of cash; you simply lost track of how much money you had in your checking account and made an honest mistake. But, if you bounce a check to the IRS for your tax payment, the government won't think this is an innocent error—and you'll wind up paying a substantial penalty.

The IRS Interprets a Bounced Check as Tax Avoidance

Writing checks against insufficient funds is a standard weapon in the arsenal of a homeowner trying to make ends meet. Sending a real, though illegitimate, check may buy you a couple of days with an impatient creditor, especially if you can somehow deposit funds in time to allow it to clear.

That strategy may work with your local big-box retailer, or that contractor you hired to do yard work, but if you bounce a check to the IRS the government will send you a “dishonored check” letter and levy you the following penalties:

  • For checks less than $25, the amount of the check (so if your $20 check bounced, you'll now owe the IRS $40)
  • For checks between $25 and $1,250, a flat penalty of $25
  • For checks of $1,250 or more, a penalty of two percent of the amount of the check. If you bounce a $10,000 check, for example, you'll owe an additional $200.
  • If you filed your taxes on April 15 and your check bounced, you will be liable for late-payment penalties on your tax debt, which range from one-half to one percent of the total amount due per month.
  • Of course, any bounced check also will trigger a penalty from the issuing bank, which may well be in excess of whatever the IRS chooses to charge you.

Is the IRS Not Taking Your Bounced Check Well? An Experienced Tax Attorney Can Help

If you owe a relatively small amount of taxes, the penalties for a bounced check are fairly light, though they can add up significantly over time if you repeat this trick again and again. But, if you owe a substantial tax debt, the IRS may interpret your bounced check as a stalling tactic, and you'll wind up on the wrong side of the government, with an IRS revenue officer breathing down your neck.

Do you have more tax questions? Call the tax experts at Travis W. Watkins, PC (800-721-7054) for a free, confidential consultation today!