When a check or other commercial payment instrument the IRS receives for payment of taxes doesn't clear the bank, a penalty of 2 percent of the amount of the check or other commercial payment instrument generally applies. However, if the amount of the check or other commercial payment instrument is less than $1,250, the penalty is $25 or the amount of the check or other commercial payment instrument, whichever is less. Thus, if the amount of the check or other commercial payment instrument is between $25 and $1,250, the penalty is $25.
The IRS can abate (remove) this penalty in certain circumstances. You may request penalty abatement by providing an explanation or evidence that it was reasonable to expect that the payment would be honored. You must make this request in writing, and should only do it after you've received the Letter 608C notifying you of a penalty assessment.
A dishonored check penalty isn't assessed on checks or other payment instruments for which you placed a stop payment order. If you're assessed a penalty, please send a copy of the stop payment request along with your penalty relief request to the service center address listed on your Letter 608C.