Please note that this blog is based on laws effective in September 2020 and may not contain later amendments. Please contact Cray Kaiser for the most recent information.
During the COVID-19 pandemic, the Internal Revenue Service (IRS) furloughed many of its employees or had them work from home to mitigate the spread of the virus. Many IRS offices remained shuttered for months, thus a backlog of millions of pieces of unopened mail, including IRS checks, accumulated in trailers set up outside IRS facilities.
What does this mean for my IRS check?
The unopened mail included payment checks, creating a problem for many electronically filed returns with tax due because the IRS computer shows a tax return filed but no payment made. Because the IRS utilizes a significant amount of automation, its computers began automatically generating tax-due notices to those who had mailed in payments. While most IRS facilities have reopened and IRS employees have returned to work, it will take them weeks, if not months, to get all of the backlogged mail opened and processed.
After receiving complaints from taxpayers and members of Congress, the IRS put information on its website about these outstanding payments. They stated that the payments will be posted as of the date when they were received by the IRS, not the date when they process them. In most cases, this will eliminate or minimize penalties and interest for late payments. So, if you mailed a check to the IRS that has yet to clear your bank, with or without a return, the IRS says that you should not cancel or put a stop-payment on the check. However, you should be sure that you have adequate funds in the account from which the check was written, so that the check will clear when the IRS does process it.
What are the potential penalties?
Normally, the penalty for a dishonored payment (a bounced check) of over $1,250 is 2% of the amount of the check, money order, or electronic payment. If the amount is $1,250 or less, the penalty is the amount of the check, money order, or electronic payment, or $25, whichever is lower.
To provide fair and equitable treatment during the COVID-19 emergency, the IRS is providing relief from bad-check penalties. The dishonored payment penalty will be waived for dishonored checks that the IRS received between March 1 and July 15 due to delays in processing. However, interest and other penalties may still apply.
What should I do now?
The short answer: nothing. The IRS has decided to suspend mailing certain tax-due notices to taxpayers temporarily until the unopened mail backlog is cleared up. So, if you have received a tax-due notice but know that you already paid the tax, the IRS asks that you wait to contact it about any unprocessed paper payments that are still pending.
For now, it’s important to be patient. There’s no reason to send additional correspondence to the IRS as it would just be added to the mountains of unopened mail. And due to high call volumes, giving the IRS a call will be of little use at this time.
If you have any concerns about your uncashed IRS check, please contact Cray Kaiser.