IRS Letter 4870 is the notice the IRS sends when an electronic tax payment you authorized was returned unpaid by your bank. The return usually happens because the account lacked funds, the routing or account number was wrong, or the account was closed before the withdrawal cleared. You still owe the original tax, a dishonored-payment penalty likely applies, and interest and late-payment penalties have been running since the original due date. The most useful thing you can do today is resubmit the payment through a different method.
Why the Letter Arrived
When you e-file and choose electronic funds withdrawal, the IRS sends a debit request to the bank account you provided. If your bank rejects that request, the IRS mails Letter 4870 to the address on file, explains why the payment did not process, and lists other ways to pay.1Internal Revenue Service. Pay Taxes by Electronic Funds Withdrawal The letter is not an audit notice and it is not a challenge to anything on your return. The money simply never reached the Treasury.
The usual causes are a balance too low to cover the withdrawal, an account number keyed incorrectly during e-filing, or an account that was closed between filing and the withdrawal date. Sometimes a bank’s fraud system blocks the debit because it does not recognize the payee, even though you authorized it.
The Dishonored-Payment Penalty
A returned electronic payment is treated the same as a bounced check. The penalty scales with the size of the failed payment:2Office of the Law Revision Counsel. 26 USC 6657 – Bad Checks
- If the payment was under $1,250, the penalty is $25 or the amount of the payment, whichever is less.
- If the payment was $1,250 or more, the penalty is 2% of the payment amount.
A $5,000 returned payment produces a $100 penalty. An $800 returned payment produces a $25 penalty. The penalty does not apply if you made the payment in good faith and had reasonable cause to believe your bank would honor it.3Internal Revenue Service. Dishonored Check or Other Form of Payment Penalty That helps if, say, your bank froze the account over a fraud alert. It generally does not help if another pending withdrawal drained the balance.
Interest and the Failure-to-Pay Penalty Are Still Running
Because your balance was never actually paid, the IRS treats it as unpaid from the original due date. Two charges accrue at the same time.
The failure-to-pay penalty is 0.5% of the unpaid tax per month or partial month, capped at 25%.4Internal Revenue Service. Failure to Pay Penalty Once an approved installment agreement is in place, the rate drops to 0.25% per month. If the IRS issues a notice of intent to levy and you still have not paid within 10 days, the rate rises to 1% per month.5Office of the Law Revision Counsel. 26 U.S. Code 6651 – Failure to File Tax Return or to Pay Tax
Interest compounds daily on the unpaid balance. The individual underpayment rate is 7% per year for the first quarter of 2026.6Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026 Interest is almost never abated. Every day you wait adds to the total.
How to Resubmit Your Payment
A failed electronic funds withdrawal cannot be resent through the same channel. Pick a different method:7Internal Revenue Service. Payments
- IRS Direct Pay is a free bank-account transfer through irs.gov. You can pay immediately or schedule a future date.
- Debit or credit card payments run through third-party processors listed on irs.gov. Processing fees vary by provider.
- The Electronic Federal Tax Payment System (EFTPS) works if you enrolled in advance.
- A check or money order can be mailed to the address shown on Letter 4870.
- A same-day wire transfer through your bank is available, usually for a fee.
Direct Pay is the fastest free option for most people. Enter your routing and account numbers, confirm your identity, and the payment typically posts within a day or two. Before you hit submit, verify the funds are actually there. A second returned payment means a second dishonored-payment penalty.
If You Cannot Pay in Full
If the reason the payment bounced is that the money is not there, do not ignore the letter. Set up a payment plan instead, and the penalty stops escalating on the usual schedule.
A short-term payment plan gives you up to 180 days to pay the balance, with no setup fee.8Internal Revenue Service. Payment Plans; Installment Agreements Interest and the failure-to-pay penalty keep accruing, but the plan itself costs nothing.
For anything longer, a long-term installment agreement lets you make monthly payments. Setup fees vary by how you apply and how you pay, and low-income taxpayers can have the direct-debit setup fee waived entirely.8Internal Revenue Service. Payment Plans; Installment Agreements While the agreement is active, the failure-to-pay penalty runs at 0.25% per month instead of 0.5%, which adds up over a multi-year plan.4Internal Revenue Service. Failure to Pay Penalty
Asking for Penalty Relief
Two paths can reduce or remove the dishonored-payment penalty.
The first is reasonable cause. If you can show you paid in good faith and had reason to believe the withdrawal would go through, the IRS may waive the penalty. Send a written explanation to the address on the notice with supporting documents, such as a bank statement showing the account had sufficient funds when you filed, or a letter from the bank confirming it rejected the payment in error.3Internal Revenue Service. Dishonored Check or Other Form of Payment Penalty
The second is first-time penalty abatement. If you filed and paid on time for the past three years and this is your first slip, the IRS can remove certain penalties administratively. Call the number on your notice to request it. If you call for reasonable cause relief and the IRS decides you qualify for first-time abatement instead, they apply whichever helps you more.9Internal Revenue Service. Penalty Relief for Reasonable Cause
Relief can reach the dishonored-payment penalty and, in some cases, the failure-to-pay penalty. Interest is a different story. The only reliable way to stop interest is to pay the tax.
What Happens If You Ignore Letter 4870
The balance does not go away. The failure-to-pay penalty and interest accumulate every month. After further notices and a final notice of intent to levy, the failure-to-pay rate doubles from 0.5% to 1% per month.4Internal Revenue Service. Failure to Pay Penalty From that point, the IRS has legal authority to garnish wages, pull money from your bank account, and seize and sell vehicles, real estate, and other assets.10Internal Revenue Service. Levy
The IRS can also file a federal tax lien, a public record that attaches to everything you own. A lien damages your credit, complicates selling property, and makes borrowing harder. None of this happens overnight, but once collection starts, unwinding it costs far more time and money than resubmitting the payment. If you cannot pay in full, set up a plan before the IRS escalates.