In addition to any other penalty provided in the
UPIA, a penalty of $25 is imposed on any person who issues a check or other
draft to the Department that is not honored upon presentment. The penalty
imposed under this Section shall be deemed assessed at the time of presentment
of the check or other draft and shall be treated for all purposes, including
collection and allocation, as part of the tax or other liability for which the
check or other draft represented payment. (UPIA Section 3-7.5) The
failure of the bank or financial institution to pay to the Department the full
face amount of the instrument (for example, because of the imposition of a
processing fee) is a dishonor of the check subject to penalty under this
Section. The bad check penalty is applicable to any payment received in the
form of a check, money order, cashier's check or other written order to pay
money and that is not honored for any reason by the bank or financial
institution upon which it is drawn. The bad check penalty is assessed on a per
check basis, therefore, for every check or draft issued to the Department that
is not honored when presented to the bank upon which it is drawn a separate $25
penalty will be assessed against the drawer of the check or draft.
EXAMPLE: Taxpayer's ST-1 is due on April 20. Taxpayer does
not file the return until May 1 and pays the tax due of $2,000 with a check
submitted with the return. Taxpayer's check is dishonored. The Department
assesses Taxpayer with penalties totaling $105. The penalties assessed include
the following: a late filing penalty of $40 ($2,000 x 2% = $40) for filing the
return late, a late payment penalty of $40 ($2,000 x 2% = $40) for failing to
pay the tax by the due date, and a bad check penalty of $25 for making payment
to the Department with a bad check.
