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That time I bounced a check to the IRS: Yes, I wrote a bad check to the IRS. Accidentally, of course, but still. Behind my name are the initials “CFP,” for Certified Financial Planner™, so supposedly I’m some kind of financial expert. And yet, I did a very un-expert thing that not even most financial un-experts do.

Brain Fog

The bad check was written in April 2014. The tax year in question was 2013, which was the same year I got an unexpected biopsy (which came out clean after several weeks of waiting), an unexpected audit by state regulators (which came out clean after several weeks of waiting), and an unexpected divorce (which came out after several weeks and much of it wasn’t clean). This all took place between August and November.

If you’ve ever been through one or more of the above, perhaps you can relate to the feeling of going through the motions of life like a responsible person but not quite being 100% there. Wishing you could concentrate better, focus like you used to, but the brain just won’t cooperate. I wasn’t aware I was in that much of a fog. I thought I was keeping it all together pretty well in 2014, considering. Until the IRS notice showed up.

“Check Payment Not Accepted By Bank” “The bank did not accept the enclosed Check for the following reason: INSUFFICIENT FUNDS. Please return the bottom portion of this form with a certified check…The PENALTY amount is…The current Interest Charge is…

Shock and Shame

“Wut?” I thought. My first reaction was to get mad at the bank. It only took a few minutes, though, to research there was no mistake. Shock, embarrassment, humiliation, shame. My jaw and knees dropped to the floor simultaneously. I bounced a check to the IRS?!?

Obviously the events of 2013 were still affecting me or I wouldn’t have written a check on one of my new post-divorce accounts without putting any money in it first.

Then the next paragraph caught my eye. “You can request penalty relief by explaining why you believed the bank would accept the Check and by providing any supporting evidence.”

My backbone straightened up. Although it was not the bank’s error, I needed to plead my case to keep my sanity.

Making the Case for Penalty Relief

First, I immediately fixed the account and had the cashier’s check, including the penalty and interest, sent.

Then, I sat down to write to the human being who would be reading my request for penalty relief. I crossed my fingers that it would be a 40- or 50-something who had been jilted in a 20+ year marriage. There are quite a few of us out there, and maybe even a few who work for the IRS, I figured. I fell on my sword.

If you’re interested in the details, below is a recap of the letter I wrote, and the multiple, confusing responses I received. The bottom line is that I got a partial waiver.

The main point, however, is that I refused to let the IRS add to my stress. The notice was a wake-up call that I was under more stress than I knew, and I made a conscious decision not to add to it.

Over the years, I have advised many clients who made tax mistakes, or were accused of doing so, to write a reasonable explanation, sit back, and be patient. The IRS may be one of the most feared entities we encounter, but there are humans who work there.

Here’s the Timeline

Here’s the correspondence timeline for those interested:

My letter was dated May 22 and said something like:

“I am writing for penalty relief….the bank did not make a mistake. I made the mistake. At the end of 2013 I was suddenly divorced after a 26 year marriage. Perhaps if the person reading this has ever been through such an experience, you might understand that in getting situated with my new life, including my finances, I have made a few absent-minded mistakes I would not normally make. I have sent a cashier’s check for the entire amount due including penalties and interest, as requested by your notice of April 29, 2014. I hope the IRS will examine my history of prompt payment for 30+ years and consider this in your determination for relief.”

On May 26, I received a notice which said:

“You have unpaid taxes for 2013” which showed the amount due, plus the following:

“Failure to pay proper estimated tax penalty – $58.00

Dishonored payment penalty – $65.54

Failure-to-pay penalty – $32.19

Interest charges – $10.87“

Because they had cashed my cashier’s check by then, I decided to wait. Maybe they hadn’t read my letter yet, I figured.

On June 12, I received a notice which said:

“Thank you for your inquiry dated May 22. We have accepted your explanation of why the bank didn’t accept your check…and we removed the penalty.”

Whew, ok. Sigh of relief. Will they actually refund the penalties, or what? Again I decided to wait.

On July 2:

“We received one of the following items from you on May 27, 2014…We’re working on your account…we need an additional 45 days to let you know what action we are taking… You don’t need to take any further action now…“

Wut? What did this mean? I thought I was ok, and now they are thinking about it? Again, because I excel at going down worry rabbit holes, I put it aside.

On July 18:

“Thank you for your recent letter dated May 22 that asked us to remove the penalty for failure to pay…We are pleased to inform you that your request to remove the penalty.. has been granted. However, this action has been taken based solely on the fact that you have a good history of timely filing and timely paying. This type of penalty removal is a one-time consideration….”

The final notice, on August 4:

“Changes to your 2013 Form 1040: Decrease in failure-to-pay penalty. You are due a refund of $32.19.”

So, I didn’t get all the other fees/penalties waived. Well, by then it didn’t matter anymore. I had advocated for myself and received a compromise. It wasn’t worth another minute of worry or effort. Heck, I was just glad I hadn’t bounced checks to anyone else that year.

The Bottom Line

Nearly everyone will have a time in our lives when our brains get discombobulated – divorce, death, job loss, new baby, relocating, and/or retirement. When we mess up, it’s important to let our minds rest, go easy on ourselves, and be strong enough to ask for help. Even financial “experts” make head-slapping mistakes. And even the IRS respects that.

For more on psychology and money, subscribe to the award-winning monthly e-letter, “The View from the Porch,” at https://bit.ly/3t2uwfn, or see Holly’s book, The Mindful Money Mentality: How to Find Balance in your Financial Future.