IRS withdrawal from my bank account failed

[Bogle-007]

My bank just notified me that the IRS withdrawal from my account failed (for 1040 tax payment due). I had accidentally left the account under-funded.

I immediately fixed the issue just now, and I made the payment through IRS direct pay web site. I should be OK, right?

[jebmke]

sure; people use Direct Pay and EFTPS all the time to pay their amount due.

[Bogle-007]

sure; people use Direct Pay and EFTPS all the time to pay their amount due.

Will there be a late fee?

[sycamore]

sure; people use Direct Pay and EFTPS all the time to pay their amount due.

Will there be a late fee?

The IRS will let you know.
My guess is there won't be.

[Bogle-007]

Looks like they were able to withdraw it today.
Thanks for the help, guys.

[Bogle-007]

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

I read about the penalty here: https://www.irs.gov/payments/dishonored ... nt-penalty

Do you think I can get the penalty excused?

I probably can't apply for "reasonable cause" (it was a careless error that I rectified the moment they notified me about it)...

But what about the "First Time Abate" relief option? https://www.irs.gov/payments/penalty-re ... ive-waiver

[truenorth418]

I think you should just pay the fine. You basically bounced a check. It was your fault. Accept responsibility, pay the small fine, be grateful the penalty wasn’t worse, and move on.

[Stinky]

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

I read about the penalty here: https://www.irs.gov/payments/dishonored ... nt-penalty

Do you think I can get the penalty excused?

I probably can't apply for "reasonable cause" (it was a careless error that I rectified the moment they notified me about it)...

But what about the "First Time Abate" relief option? https://www.irs.gov/payments/penalty-re ... ive-waiver

Sure - try the “First Time” relief option. Why not?

Please post back when you hear if you’ve qualified.

[HueyLD]

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

I read about the penalty here: https://www.irs.gov/payments/dishonored ... nt-penalty

Do you think I can get the penalty excused?

I probably can't apply for "reasonable cause" (it was a careless error that I rectified the moment they notified me about it)...

But what about the "First Time Abate" relief option? https://www.irs.gov/payments/penalty-re ... ive-waiver

Based on the linked IRS guidance, I think the OP should fill out Form 843. There is nothing to lose by asking for abatement of penalty.

Do follow all the rules in the guidance. Good luck.

[Bogle-007]

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

I read about the penalty here: https://www.irs.gov/payments/dishonored ... nt-penalty

Do you think I can get the penalty excused?

I probably can't apply for "reasonable cause" (it was a careless error that I rectified the moment they notified me about it)...

But what about the "First Time Abate" relief option? https://www.irs.gov/payments/penalty-re ... ive-waiver

Sure - try the “First Time” relief option. Why not?

Please post back when you hear if you’ve qualified.

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

I read about the penalty here: https://www.irs.gov/payments/dishonored ... nt-penalty

Do you think I can get the penalty excused?

I probably can't apply for "reasonable cause" (it was a careless error that I rectified the moment they notified me about it)...

But what about the "First Time Abate" relief option? https://www.irs.gov/payments/penalty-re ... ive-waiver

Based on the linked IRS guidance, I think the OP should fill out Form 843. There is nothing to lose by asking for abatement of penalty.

Do follow all the rules in the guidance. Good luck.

Do you think I should appeal by phone (possible long wait time) or mail the From 843 (likely long processing time + interest accrual)?

Since appealing by mail would likely take a while, should I should pay first and hope for the refund?

[TropikThunder]

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

I read about the penalty here: https://www.irs.gov/payments/dishonored ... nt-penalty

Do you think I can get the penalty excused?

I probably can't apply for "reasonable cause" (it was a careless error that I rectified the moment they notified me about it)...

But what about the "First Time Abate" relief option? https://www.irs.gov/payments/penalty-re ... ive-waiver

Sure - try the “First Time” relief option. Why not?

Please post back when you hear if you’ve qualified.

Might want to save the “First Time” for a bigger penalty.

[TomatoTomahto]

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

I read about the penalty here: https://www.irs.gov/payments/dishonored ... nt-penalty

Do you think I can get the penalty excused?

I probably can't apply for "reasonable cause" (it was a careless error that I rectified the moment they notified me about it)...

But what about the "First Time Abate" relief option? https://www.irs.gov/payments/penalty-re ... ive-waiver

Sure - try the “First Time” relief option. Why not?

Please post back when you hear if you’ve qualified.

Might want to save the “First Time” for a bigger penalty.

Would it be disallowed because it wasn’t really the first time?

[pizzy]

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

I read about the penalty here: https://www.irs.gov/payments/dishonored ... nt-penalty

Do you think I can get the penalty excused?

I probably can't apply for "reasonable cause" (it was a careless error that I rectified the moment they notified me about it)...

But what about the "First Time Abate" relief option? https://www.irs.gov/payments/penalty-re ... ive-waiver

Sure - try the “First Time” relief option. Why not?

Please post back when you hear if you’ve qualified.

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

I read about the penalty here: https://www.irs.gov/payments/dishonored ... nt-penalty

Do you think I can get the penalty excused?

I probably can't apply for "reasonable cause" (it was a careless error that I rectified the moment they notified me about it)...

But what about the "First Time Abate" relief option? https://www.irs.gov/payments/penalty-re ... ive-waiver

Based on the linked IRS guidance, I think the OP should fill out Form 843. There is nothing to lose by asking for abatement of penalty.

Do follow all the rules in the guidance. Good luck.

Do you think I should appeal by phone (possible long wait time) or mail the From 843 (likely long processing time + interest accrual)?

Since appealing by mail would likely take a while, should I should pay first and hope for the refund?

For $97, why pursue this at all?

[samsoes]

Pay the fine. It wasn't their fault that the payment bounced. Besides, Uncle Sam needs additional cash these days.

[RudyS]

I think you should just pay the fine. You basically bounced a check. It was your fault. Accept responsibility, pay the small fine, be grateful the penalty wasn’t worse, and move on.

That's what I did when it happened to me. Fat-fingered the bank account number on the 1040. Of course it then carried to the state too. It never occurred to me to try to escape the penalty.

[Bogle-007]

For $97, why pursue this at all?

Pay the fine. It wasn't their fault that the payment bounced. Besides, Uncle Sam needs additional cash these days.

I think the penalty is too severe. What did it cost them other than an automatically-generated notification? I corrected the error within minutes of receiving the notice from my bank.

[pizzy]

What did it cost them other than an automatically-generated notification?

I think that's an interesting way to think of how penalties/fees should be applied.

[Bogle-007]

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

I read about the penalty here: https://www.irs.gov/payments/dishonored ... nt-penalty

Do you think I can get the penalty excused?

I probably can't apply for "reasonable cause" (it was a careless error that I rectified the moment they notified me about it)...

But what about the "First Time Abate" relief option? https://www.irs.gov/payments/penalty-re ... ive-waiver

Sure - try the “First Time” relief option. Why not?

Please post back when you hear if you’ve qualified.

Might want to save the “First Time” for a bigger penalty.

Would it be disallowed because it wasn’t really the first time?

Here are the rules:

"How to Qualify for First Time Abate
You may qualify for First Time Abate for a penalty if you have a history of good tax compliance.

History of Good Tax Compliance
You are considered having a good tax compliance history if you:

Filed the same return type, if required, for the past 3 tax years before the tax year you received the penalty.
Didn't receive any penalties during the prior 3 years, or any penalty was removed for an acceptable reason other than First Time Abate
Example: You request First Time Abate for a Failure to Pay Penalty on your 2022 tax return. You don't have any unresolved penalties on tax returns for 2019, 2020 and 2021 and didn't get First Time Abate relief. Based on this information, you have a good history of compliance."

[Stinky]

Do you think I should appeal by phone (possible long wait time) or mail the From 843 (likely long processing time + interest accrual)?

Since appealing by mail would likely take a while, should I should pay first and hope for the refund?

I don’t have a clear view as to whether you should appeal by phone or in the mail.

If you have 30 minutes or an hour to “kill” within the next few days during IRS business hours, you could try the phone option. If you don’t have the time, or your call is unsuccessful, you could revert to paper.

If you do file by paper, I wouldn’t worry about interest accrual. You’ve already paid the taxes, as you said upthread, so there should be no interest on unpaid taxes. And, even if your appeal is unsuccessful, the interest accrual on a $97 penalty would be minimal.

From the link you posted to the IRS website, you sound like a perfect candidate for an abatement. Go for it!

[Bogle-007]

I think you should just pay the fine. You basically bounced a check. It was your fault. Accept responsibility, pay the small fine, be grateful the penalty wasn’t worse, and move on.

That's what I did when it happened to me. Fat-fingered the bank account number on the 1040. Of course it then carried to the state too. It never occurred to me to try to escape the penalty.

I believe you can still apply for the waiver if you’re within 2 years of the time of your payment.

[Bogle-007]

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

I read about the penalty here: https://www.irs.gov/payments/dishonored ... nt-penalty

Do you think I can get the penalty excused?

I probably can't apply for "reasonable cause" (it was a careless error that I rectified the moment they notified me about it)...

But what about the "First Time Abate" relief option? https://www.irs.gov/payments/penalty-re ... ive-waiver

Sure - try the “First Time” relief option. Why not?

Please post back when you hear if you’ve qualified.

Might want to save the “First Time” for a bigger penalty.

If I am understaing the rules correctly, I don't think you can "save" the "First time abate" option. See here:

"How to Qualify for First Time Abate
You may qualify for First Time Abate for a penalty if you have a history of good tax compliance.

History of Good Tax Compliance
You are considered having a good tax compliance history if you:

Filed the same return type, if required, for the past 3 tax years before the tax year you received the penalty.
Didn't receive any penalties during the prior 3 years, or any penalty was removed for an acceptable reason other than First Time Abate
Example: You request First Time Abate for a Failure to Pay Penalty on your 2022 tax return. You don't have any unresolved penalties on tax returns for 2019, 2020 and 2021 and didn't get First Time Abate relief. Based on this information, you have a good history of compliance."

Source: https://www.irs.gov/payments/penalty-re ... ive-waiver

So ... Say I don't request First time abate now. Then I get another penalty down the line in the next 3 years -- and apply for First time abate. I think I would be denied because I already received this $97 penalty here. Do you all think this is a correct interpretation?

[Stinky]

Didn't receive any penalties during the prior 3 years, or any penalty was removed for an acceptable reason other than First Time Abate………..

So ... Say I don't request First time abate now. Then I get another penalty down the line in the next 3 years -- and apply for First time abate. I think I would be denied because I already received this $97 penalty here. Do you all think this is a correct interpretation?

Yes, I think you’re interpreting it correctly.

I’d suggest you use it now. Why not?

[celia]

For $97, why pursue this at all?

Pay the fine. It wasn't their fault that the payment bounced. Besides, Uncle Sam needs additional cash these days.

I think the penalty is too severe. What did it cost them other than an automatically-generated notification? I corrected the error within minutes of receiving the notice from my bank.

That’s the wrong way to look at it. The payment was due on April 18 but it looks like you submitted it on April 20; thus it was late.


The late fee is based on how long it was late and the dollar amount that was late. It could have also included late fees if any of your withheld taxes (plus estimated taxes) for any “quarter” were late for the quarter. This late fee can be assessed even if the total amount owed for the year was received in time.

Check out Form 2210 to see if you had any late quarterly penalties.
https://www.irs.gov/pub/irs-pdf/f2210.pdf

After you read the form, you may change your mind and agree $97 is a good price to not have to file Form 2210!

[truenorth418]

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

All of this to avoid a $97 penalty on a mistake that was your fault? I could see fighting it if it cost you a lot of money. Is $97 a lot of money to you? You’ve already said this was your fault.

[hachiko]

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

I read about the penalty here: https://www.irs.gov/payments/dishonored ... nt-penalty

Do you think I can get the penalty excused?

I probably can't apply for "reasonable cause" (it was a careless error that I rectified the moment they notified me about it)...

But what about the "First Time Abate" relief option? https://www.irs.gov/payments/penalty-re ... ive-waiver

Sure - try the “First Time” relief option. Why not?

Please post back when you hear if you’ve qualified.

Might want to save the “First Time” for a bigger penalty.

If I am understaing the rules correctly, I don't think you can "save" the "First time abate" option. See here:

"How to Qualify for First Time Abate
You may qualify for First Time Abate for a penalty if you have a history of good tax compliance.

History of Good Tax Compliance
You are considered having a good tax compliance history if you:

Filed the same return type, if required, for the past 3 tax years before the tax year you received the penalty.
Didn't receive any penalties during the prior 3 years, or any penalty was removed for an acceptable reason other than First Time Abate
Example: You request First Time Abate for a Failure to Pay Penalty on your 2022 tax return. You don't have any unresolved penalties on tax returns for 2019, 2020 and 2021 and didn't get First Time Abate relief. Based on this information, you have a good history of compliance."

Source: https://www.irs.gov/payments/penalty-re ... ive-waiver

So ... Say I don't request First time abate now. Then I get another penalty down the line in the next 3 years -- and apply for First time abate. I think I would be denied because I already received this $97 penalty here. Do you all think this is a correct interpretation?

It's unclear that this type of penalty would be one that is considered a penalty that forecloses FTA.

Because of the possibility of FTA in the future, even if by IRS error, I personally wouldn't use it for this penalty. But the possible penalties I face are pretty high, so if any other likely penalties for you are just a couple hundred dollars, maybe it's worth just risking that in the future and filing for FTA now.

HOWEVER, I think the first step would be determining whether this penalty qualifies for abatement under the FTA program in the first place. Not all penalty types are eligible, and I have never dealt with the dishonored payment penalty. Some electronic payment penalties are not eligible.

P.S. I don't think the fairness of the penalty or the cost to the IRS is at all relevant. The IRS has statutory duties to enforce the tax code. I also don't think you have any duty to pay more than you're required to.

If the conditions of the penalty apply, you owe it, unless the conditions of penalty abatement applies, then you don't owe it.

[pizzy]

I just received a letter from the IRS. They want me to pay a $97 penalty for "dishonored check or other form of payment."

All of this to avoid a $97 penalty on a mistake that was your fault? I could see fighting it if it cost you a lot of money. Is $97 a lot of money to you? You’ve already said this was your fault.

I agree. And I don’t understand this about people. Whatever happened to taking responsibility for your mistakes?