TC 671: Dishonored Subsequent Payment

What the code actually does

IRS Document 6209, Section 8A defines TC 671 as reversing "a dishonored check submitted as a subsequent payment" — the everyday payment code, TC 670, that posts whenever a taxpayer sends money after the original return, rather than with it.

Because TC 670 is among the most commonly used payment codes on an account, TC 671 is correspondingly one of the more frequently encountered dishonored-payment codes in practice.

The EFT exception most practitioners never learn

Doc 6209 states the general penalty rule and then carves out an exception in the same sentence: a TC 286 is systemically generated "except for blocking series 800-899 (EFT Payments)." An electronically returned payment — a failed ACH debit or a bounced Direct Pay transaction, for example — does not trigger the automatic bad-check penalty the way a dishonored paper check does.

That distinction matters directly to a reasonable-cause argument. Where blocking series 800-899 applies and no TC 286 appears despite the reversal, there is no automatic penalty to abate in the first place — the module (the IRS's record for one tax period within the account) shows no TC 286 not because of an oversight, but because the code is working as designed.

Confirming which case applies before advising the client

Pull the full Document Locator Number (DLN), not just the transaction code, to identify the blocking series. IRM 21.5.7.3 points to the endorsement and encoder information on the remittance itself, which can "reconstruct the Document Locator Number (DLN) assigned to the remittance." From there, IRM 21.5.7.3.2 directs the account-level research — CC (Command Code) TXMOD and CC IMFOL/BMFOL — to confirm the blocking series against the module.

Where the reversal is a paper-check dishonor outside the 800-899 series, expect the automatic TC 286 under IRC §6657 and evaluate reasonable cause on those terms; where it is an EFT reversal within that series, there is generally no separate penalty transaction to address.

What TC 671 gets confused with

It gets confused with TC 672, the correction of a TC 670 posted in error by the IRS. Inputting a TC 672 also relabels the original TC 670 on the module as TC 673 — TC 673 is not a separate correction a preparer requests, just the changed display code left behind by a TC 672. Neither 672 nor 673 carries the dishonored-check penalty consequence TC 671 does.

It gets confused with the other payment-specific dishonor codes in this batch — TC 611, TC 621, TC 651 — which share the same underlying mechanism but apply to different originating payment types (a return remittance, an extension payment, a federal tax deposit, respectively). TC 671 is specifically the TC 670 reversal, and none of those other codes ever reverse a TC 670.

It gets confused with an automatic penalty in every case. The EFT exception above means a TC 671 reversal does not always mean a TC 286 is coming.

The practitioner's actual next step

Identify the blocking series on the reversed transaction before assuming a bad-check penalty applies.

Where a paper check bounced outside the EFT exception, evaluate reasonable-cause relief for the resulting TC 286 on its own terms.

Confirm with the client's bank or payment processor why the payment was returned, since the cause differs materially between a paper check and a failed electronic debit.

Recheck the account for the underlying balance the TC 670 was meant to satisfy — it is still outstanding as of the reversal, with interest and penalty running accordingly.