If you have received a notice from the IRS, it is natural to get panicked. No, it does not mean that you will be behind bars, or your assets will be seized by them. IRS issues different notices depending on the situation. If you have received a Dishonored Payment Notice, it simply means that your check has bounced due to various reasons.
Overview of Dishonored Payment Notice
The IRS can issue a Dishonored Payment Notice if the check issued by you has bounced back due to insufficient funds, damaged checks, or incorrect information mentioned on the check. In such situations, the IRS will charge a penalty of 2% of the total check amount. The IRS will also charge interest to these penalties until the amount owed to them is paid in full.
If you feel that you have been issued the Dishonored Payment Notice by error, then you can take the help of an IRS tax accountant to dispute the claim. In this case, you need to write a written statement to the IRS explaining why you are disputing the notice.
In addition to this, you need to:
- Submit substantial proof showing that there were sufficient funds in your account
- Documents to be submitted as proof can either be bank statements or a letter from your bank
- Date, sign, and mail these statements to the address mentioned in your notice
Applying for an Extension Plan
If your application gets rejected and you are not able to pay off the amount on or before the due date, then you can opt for an extension plan allowing you to split your payment amount into monthly installments of 6 months.
It is recommended you consult with a tax professional to check your eligibility for the extension plan. If you have any outstanding payments from previous installment plans or you do not have sufficient funds to pay off the installments, then it is advisable not to apply for an extension.
A dishonored Payment Notice can be frustrating but can be resolved using the right method. Tax professionals can help you decode such notices and help resolve such issues easily.