Sharing experiences dealing with IRS penalties with good cause

I understand most people that had the same problem should have dealed with it already. But wanted to share my experience just in case it helps whoever search online in the future. Contents are summarized by ChatGPT 5.2 as I have no confidence in my English, hope you don’t mind.

TL;DR: This situation started because the IRS mistakenly deposited a $1,400 COVID stimulus payment into my bank account jan, 2025. I did not realize I ever received this money, and I did not see any notice on IRS.gov or in my account. On 12/22/2025, I suddenly received a CP504 (Final Balance Due / Intent to Levy) saying I needed to repay the $1,400 plus interest and penalty, and claiming they had notified me back in June — but I never actually received or saw any earlier notice. After calling the IRS, I learned this was tied to the stimulus overpayment and worked through resolving it.

Main content:

I received an IRS CP504 notice (final balance due / intent to levy) for my 2021 tax return showing:

Tax owed: $1,400

Interest: $48.89

Penalty: $35

Total: $1,483.89

I called the IRS (after ~2 hours on hold 😅). The agent was very helpful and approved a penalty waiver over the phone.

Interestingly, the IRS system showed the penalty as $49 instead of $35.

My guess is this is because the IRS system was displaying amounts “as of” a future date (1/5/2026) rather than the actual notice date (12/22/2025), so it was projecting additional accrued penalty. Even the agent didn’t know why (very on-brand IRS).

To be safe, I paid online immediately:

Paid $1,400 (tax) + $48.89 (interest)

Did not pay the penalty since it was waived

Payment was submitted on 12/22

IRS shows the payment date as 12/23, which is normal (next-business-day processing)

Any overpayment will be automatically refunded by the IRS.

What my 2021 transcript currently says (pulled on 12/22):

Tax balance: $1,400

Accrued interest: ~$52

Accrued penalty: $49

“As of” date: early January 2026 (today is 12/22, 2025)

This looks scary, but it just means:

•The transcript was generated before my payment posted

•The penalty waiver hasn’t posted yet

•IRS systems update in batches, not instantly

*Why this is not a problem*

Once the tax is paid, penalties stop accruing

IRS processing delays do not create new penalties

When the waiver posts, the penalty (and related interest) will be removed

Any extra amount will be refunded automatically

*What is an IRS transcript?*

An IRS transcript is basically the IRS’s internal ledger of your tax account. It shows tax owed, payments, interest, penalties, refunds, notices, and account updates. It does not update in real time.