If your payment to the IRS bounced, the credit is reversed and your tax bill is reinstated as of the original due date, a dishonored payment penalty is added, and failure-to-pay penalties plus daily interest keep running until you replace the funds. The IRS will not resubmit the payment for you. The faster you send guaranteed replacement funds, the less the damage grows.
The Letter You’ll Get in the Mail
The IRS notifies you of a returned payment with Letter 608C. It confirms the payment came back unpaid, states that the IRS will not try the transaction again, and tells you a penalty has been assessed for the failed payment.1Internal Revenue Service. Topic No. 206, Dishonored Payments It also gives you the service center address you’ll use for any follow-up, including a request to remove the penalty.
Because the original credit is reversed, your account now shows an unpaid balance dating back to the original due date. Every penalty and interest charge is calculated as if the payment had never been made.
The Dishonored Payment Penalty
The first new charge is the penalty for the failed transaction itself, separate from any late-payment charges. Under 26 U.S.C. § 6657, if the bounced payment was $1,250 or more, the penalty is 2% of the payment amount. A dishonored $5,000 payment triggers a $100 penalty; a $1,500 payment triggers $30.2Office of the Law Revision Counsel. 26 USC 6657 Bad Checks
If the payment was less than $1,250, the penalty is $25 or the amount of the payment, whichever is smaller. A bounced $800 check means a $25 penalty; a bounced $15 payment means a $15 penalty.3Internal Revenue Service. Dishonored Check or Other Form of Payment Penalty The rule applies to electronic payments the same way it applies to paper checks.
One exception: the penalty doesn’t apply if you placed a stop payment order on the check. If it’s assessed anyway, you can ask the IRS to remove it by sending a copy of the stop payment order to the service center address on your Letter 608C.1Internal Revenue Service. Topic No. 206, Dishonored Payments
Failure-to-Pay Penalty and Interest
The reinstated balance also triggers the ordinary failure-to-pay penalty under 26 U.S.C. § 6651. It runs at 0.5% of the unpaid tax for each month or partial month the balance is outstanding, measured from the original due date, and caps at 25% of the unpaid amount.4Office of the Law Revision Counsel. 26 USC 6651 Failure to File Tax Return or to Pay Tax If you file your return on time and get into an approved installment agreement, the rate drops to 0.25% per month while that agreement is in effect.5Internal Revenue Service. Failure to Pay Penalty
Interest runs on top of that. The rate for individual underpayments is the federal short-term rate plus three percentage points, adjusted quarterly and compounded daily.6Internal Revenue Service. Topic No. 653, IRS Notices and Bills, Penalties and Interest Charges For the first quarter of 2026 the rate is 7% per year,7Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026 and starting April 1, 2026, it drops to 6%.8Internal Revenue Service. Internal Revenue Bulletin 2026-8 Interest accrues on the penalties themselves as well as the tax. Daily compounding is what makes any delay expensive. Only paying in full stops the clock.
How to Resubmit Your Payment
The single most useful thing you can do is get replacement funds to the IRS quickly, using a different method than the one that failed.
Guaranteed funds are the safest: a cashier’s check, certified check, or money order. The bank verifies the money before issuing them, so they can’t bounce. For electronic payment, IRS Direct Pay pulls directly from a checking or savings account at no cost. EFTPS is another option if you’re already enrolled.
Send enough to cover the original tax balance, the dishonored payment penalty shown on your Letter 608C, and your best estimate of the failure-to-pay penalty and interest through the day the IRS will receive the new payment. If you come up a little short, the IRS will bill you for the difference rather than treat it as another failed payment.
Apply the payment to the correct year and form. On a mailed check, write your Social Security number, the tax year, and the form number (for example, “2025 Form 1040”) in the memo line, and add the notice number if you’re responding to one. Mail to the address on the notice, which may differ from the normal filing address. Certified mail with a return receipt gives you proof of the delivery date, which is what determines when penalties stop growing.
Before you submit anything electronic, check every digit of your routing and account numbers, and confirm your available balance rather than your account balance. A second bounced payment brings a second dishonored payment penalty on top of everything already owed.
Asking the IRS to Remove the Penalties
The dishonored payment penalty is not automatically final. The statute itself says it does not apply if the payment was tendered “in good faith and with reasonable cause to believe that it would be duly paid.”2Office of the Law Revision Counsel. 26 USC 6657 Bad Checks A bank error, a delayed deposit, or an unexpected hold on your account can qualify.
Send a written explanation to the service center address on your Letter 608C once the penalty has been assessed, and attach documents that show you had reason to expect the funds would clear. Bank statements showing sufficient balances or a letter from your bank acknowledging its error are the strongest evidence.3Internal Revenue Service. Dishonored Check or Other Form of Payment Penalty
The failure-to-pay penalty has its own separate relief route. If you filed all required returns for the prior three tax years and had no penalties in that period (or any penalties were removed for an acceptable reason), you may qualify for First Time Abate, the IRS’s most commonly granted administrative waiver.9Internal Revenue Service. 10Internal Revenue Service. About Form 843, Claim for Refund and Request for Abatement First Time Abate covers the failure-to-pay and failure-to-file penalties. It does not cover interest; interest is set by statute and the IRS has almost no discretion to waive it.
If You Can’t Pay the Full Balance
If you don’t have enough to cover the reinstated tax plus the penalties and interest all at once, pay as much as you can right away. Every dollar reduces the base that penalties and interest compound on. Then set up a payment plan for the rest.
The IRS offers a short-term plan of up to 180 days with no setup fee, and long-term installment agreements with fees that vary by how you apply:
- Direct debit set up online: $22
- Direct debit set up by phone, mail, or in person: $107
- Standard plan set up online: $69
- Standard plan set up by phone, mail, or in person: $178
Taxpayers with adjusted gross income at or below 250% of the federal poverty level can have these fees waived or reimbursed.11Internal Revenue Service. Payment Plans Installment Agreements You can apply online or by submitting Form 9465.12Internal Revenue Service. About Form 9465, Installment Agreement Request
One warning if you go this route: a bounced installment payment can lead the IRS to propose terminating the agreement. You’ll get 30 days’ written notice to cure the missed payment before termination takes effect.13Internal Revenue Service. IRM 5.14.11 Defaulted Installment Agreements If the agreement does terminate, the failure-to-pay rate goes back up from 0.25% to 0.5% per month and collection activity can resume. That’s the practical case for a direct debit installment agreement: automatic withdrawals remove the chance of another payment going wrong.