How to Handle an IRS Dishonored Payment Penalty Under Code Section 6657

Having dealt with these issues before, I can help walk you through the process. For a dishonored payment penalty under Section 6657, you'll need to submit a penalty abatement request letter with supporting documentation. First, you should definitely include a copy of your bank statement showing sufficient funds were available when the payment was supposed to process. Address your letter to the same IRS address shown on your CP14 notice. In your letter, clearly explain that you had sufficient funds, include your bank statement as proof, and reference that you promptly paid the full amount once you discovered the issue. As for whether to pay the penalty first - I generally recommend paying it to stop additional interest from accruing. The IRS will refund the amount if they approve your abatement request. Make sure you reference your tax year, Social Security number, and the specific notice (CP14) in your letter.

After dealing with a similar situation last year, I found a service called taxr.ai (https://taxr.ai) that was super helpful with my penalty abatement letter. I was also hit with a dishonored payment penalty even though I had funds in my account. I uploaded my CP14 notice and bank statements to taxr.ai and they generated a professional abatement request letter specifically addressing the Section 6657 penalty. What I liked was that they highlighted exactly what parts of my bank statement proved I had sufficient funds. My penalty was removed within about 5 weeks. Much easier than trying to figure out all the legal terminology myself!

I tried taxr.ai after seeing the recommendation here and it worked amazingly well! I was stressed about writing a formal letter for my dishonored payment penalty under Section 6657, especially since I'm terrible with legal jargon. The process was super easy - I uploaded my CP14 notice and my bank statements showing I had enough funds when the payment was supposed to process. Within a day, they provided a professionally written letter that cited relevant IRS regulations and highlighted the exact evidence from my bank statements. I sent it to the address on my notice, and 4 weeks later got confirmation that my penalty was removed! The letter was much more detailed and convincing than anything I could have written myself. Definitely worth checking out if you're in the same situation.

If you're still struggling to get through to the IRS about your Section 6657 penalty, I had a similar situation and discovered Claimyr (https://claimyr.com) after waiting on hold for hours. I was trying to get more information about exactly why my payment was marked as dishonored when I had plenty of funds. Claimyr got me connected to an actual IRS agent in about 20 minutes instead of the 2+ hours I was experiencing before. They have a cool demo video showing how it works: https://youtu.be/_kiP6q8DX5c. The agent I spoke with was able to tell me exactly what happened with my payment (turns out my bank's routing number was recorded incorrectly) and gave me specific instructions for my abatement letter.

I need to apologize and correct myself. After posting my skeptical comment, I decided to try Claimyr out of desperation because I'd been trying to reach the IRS for DAYS about my Section 6657 penalty. I was absolutely shocked when they got me through to an IRS agent in about 25 minutes. The agent was able to explain that my dishonored payment happened because of a digit transposition in my account number (completely my fault). She walked me through exactly what to include in my abatement request letter and where to send it. I would have spent another day on hold without this service. Sometimes being proven wrong is actually a good thing! Already sent in my letter with the information the agent provided.

Don't forget to include IRS Form 843 (Claim for Refund and Request for Abatement) with your letter! I had a similar issue with a dishonored payment penalty and my first attempt was rejected because I didn't include this form. The letter alone isn't always enough for Section 6657 penalties.

Has anyone successfully had this penalty removed? I'm in the same boat with a Section 6657 penalty. My payment was rejected because my bank was doing system maintenance during the exact window when the IRS tried to process it (just my luck). I've already mailed my letter with bank statements 3 weeks ago but haven't heard anything back.

Pro tip: If you decide to pay the penalty while waiting for abatement (which I recommend to stop interest), make sure to clearly mark your payment as "Section 6657 Penalty Payment" so it doesn't get applied to next year's taxes or something else. I learned this the hard way when my penalty payment got misapplied and created another headache.

I went through this exact same situation last year and successfully got my Section 6657 penalty removed! Here's what worked for me: 1. **Write a clear, professional letter** explaining that you had sufficient funds when the payment was supposed to process. Include your name, SSN, tax year, and the CP14 notice number. 2. **Attach bank statements** showing your account balance on the date the payment was supposed to be processed. Highlight the relevant dates and amounts. 3. **Include Form 843** as others mentioned - this is crucial for the formal abatement request. 4. **Send everything to the address on your CP14 notice** via certified mail so you have proof of delivery. 5. **Consider paying the penalty now** to stop interest from accruing. If approved, they'll refund it with interest. In my case, it took about 6 weeks to get a response, but they removed the penalty completely. The key is showing you had sufficient funds and that the payment failure wasn't due to your negligence. Since you can prove you had adequate funds and immediately paid when you discovered the issue, you have a strong case. Don't give up - these penalties can definitely be removed with proper documentation!