Letter 608-C: Request for information on a dishonored payment penalty (IRC 6657)

What Letter 608-C is

The letter the IRS uses to ask for more information before deciding a request to remove the dishonored-payment penalty under IRC 6657, which since July 2, 2010 covers "EFTPS payments and deposits" and other electronic payments, not only paper checks (IRM 20.1.10.7(2), Nov. 18, 2019). The manual pairs it with Letter 854-C, the denial (IRM 20.1.10.7.3, Aug. 20, 2024). The penalty is 2% of the payment if $1,250 or more, $25 if the payment was $25 to $1,249.99 (IRM 20.1.10.7.1(1)), and posts as TC 280 or TC 286.

The deadline

Reply by the date on the letter. No statutory deadline is stated in the manual.

What to do

Send what the letter asks for in writing. "Oral testimony to that effect will not be accepted" and "A bank letter is required if the reason is bank error" (IRM 20.1.10.7.3). Bank error is coded PRC 017, an EFTPS or Treasury Financial Agent failure PRC 032 with a TFA incident report, a mis-coded stop payment PRC 045 or 017, and erroneous IRS advice PRC 044 (IRM 20.1.10.7.4, Oct. 12, 2022). Do not ask for First Time Abate; "The first time abate (FTA) administrative waiver does not apply." Separately, the deposit the payment was meant to make is still late for IRC 6656 purposes.

The dishonored payment penalty

IRC 6657 imposes a penalty when a payment to the IRS is not honored: a check returned for insufficient funds, a stopped payment, or an electronic payment through EFTPS or another channel that the bank rejects or reverses. The penalty is 2 percent of the payment for payments of $1,250 or more, and for smaller payments the lesser of $25 or the amount of the payment. It is assessed on the account automatically when the reversal posts, and it is separate from the consequences of the payment not having been made: a deposit that bounced is a deposit not made, so the failure-to-deposit penalty under IRC 6656 applies to it as well, and the tax remains unpaid with interest. The penalty is removable, but on narrow grounds. The statute excuses a payment tendered in good faith with reasonable cause to believe it would be honored, and the IRS reads that to mean the money was there and something outside the taxpayer's control went wrong.

What the letter wants, and what does not work

Letter 608-C is sent when a request to remove the penalty needs support before it can be decided, and the support has to be documentary. A statement that the account had sufficient funds is not enough; the IRS wants the bank's own letter confirming the balance on the date and that the dishonor was the bank's error, or, for an EFTPS or Treasury Financial Agent failure, the incident reference from EFTPS customer service. A stop payment that was placed in error needs the bank's confirmation that the stop was mistaken. Reliance on erroneous IRS advice needs the date, the employee and what was said. Two things do not work: oral explanations, which the manual says will not be accepted, and First Time Abate, which does not apply to this penalty at all. If the request is denied, a Letter 854-C follows with appeal rights. Separately, make the deposit again at once if it has not been, because every day it remains unpaid adds to the deposit penalty and interest that the 6657 request does not address. The dishonored deposit penalty calculator computes both penalties on a bounced deposit, the bank-error abatement kit covers the bank letter for the related deposit penalty, and the no-defense penalties page lists which penalties have no relief route at all.

Questions about Letter 608-C

Have a different notice? The IRS notice decoder lists all 77 in the order they tend to arrive.