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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Hello, I just bounced a check for the quarterly tax payment

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Hello,

I just bounced a check for the quarterly tax payment (sole proprietor) to the IRS. I was closing out some old bank accounts and got caught by mistake without enough cash in the checking account. I immediately transferred money into the checking account, but I don't know what happens next.

I read another answer here that it is up to the bank clearinghouse, not the IRS, if the check will be presented again. I just spoke to my bank's customer service (Wells Fargo), and they told me that it will be up to the IRS to try again. The Wells Fargo notification shows that the check was "returned." The bank customer service told me that this returned notification means that the check was presented once.

My question: is the clearinghouse part of my bank? Is it possible to speak to someone in the clearinghouse and find out if the check can be re-presented or if I need to make arrangements to write another check? I was not reassured by the bank customer service information that it is up to the IRS because the IRS link on the topic clearly says it's up to the clearinghouse to re-present it. How do I find out if it will be re-presented (and urge them to do so to avoid the 2% IRS penalty)?

Thanks

LEV :

Hi and welcome to Just Answer!Sorry for your situation...
Here is IRS response to similar situation - http://www.irs.gov/taxtopics/tc206.html


The Internal Revenue Service does not submit checks or other commercial payment instruments a second time for payment. The re-submission of a payment is in the hands of the clearinghouse. When a check or other commercial payment instrument is not paid, the clearinghouse frequently resubmits it to the bank.
That is not done by your bank - but by the bank that servicing IRS account. As there is large volume on transactions and most transactions are automated - there is no way you may located your check or contact anyone in the clearinghouse. Sorry that is not possible.
As the IRS stated - the clearinghouse frequently resubmits it to the bank - so - you may expect that your check would be resubmitted in about 3-5 day - and may contact your bank to verify.
If not - your only option to issue another check.
Again - there is no way to locate your payment and contact the clearinghouse about your specific check.
If the IRS will assess penalty - you will receive a letter Letter 608C with explanation. You may always ask the IRS to abate penalty - but only after you receive the notification.
The best path forward might be to ask the IRS to abate penalties, however it would be very unlikely that interest charges are abated. File a form 843 -http://www.irs.gov/pub/irs-pdf/f843.pdf
to request the "accuracy related penalty" be abate based on reasonable cause. If you provide the reason like "I forgot" - I do not think it will be considered as reasonable - so be careful when prepare an abatement request.
Here are instructions - http://www.irs.gov/pub/irs-pdf/i843.pdf
If the IRS accepts your reasons as reasonable - and agrees to abate penalties - at least part of the issue would be resolved.

LEV :

At this point - your only option to wait and verify with your bank if the check is resubmitted.

Customer:

Hello Lev. Thanks for the reply. So I understand the clearinghouse is essentially a middle-man that can't be contacted, and anything that happens is at the clearinghouse's discretion. If the clearinghouse resubmits it and the check clears, I should avoid the 2% penalty, correct?

Customer:

If nothing happens in 3-5 days, would you suggest I send another payment or wait for an IRS letter?

LEV :

Your understanding is correct - the clearinghouse is a middle-man between banks - not between customers of these banks - they communicate with bank representative only.
You are also correct - if the check is resubmitted and cleared - there would not be penalty.
See the explanation provided by the IRS
If your check or other commercial payment instrument is resubmitted and there are sufficient funds in your bank account to cover it, the check will be paid and not returned to the Internal Revenue Service, and therefore, you will not be charged with the penalty and interest for an unpaid check.

LEV :

If the check would not be resubmitted in 5 days - most likely - it will not be resubmitted. I suggest to wait 1-2-3 days more - and send another payment. You may also want to stop payment on your first check as well.

Customer:

OK - thanks for your help.

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