Received an IRS CP162C notice? What you need to know now

Receiving an IRS CP162C notice can be a bit overwhelming, but it’s important to understand the reason behind the letter and know how to take action. This notice is typically issued to partnerships and S corporations when the IRS has assessed a penalty for filing issues, such as submitting the return late, omitting required information, failing to file electronically when required or not filing the partnership’s tracking report.

What triggers a CP162C notice?

The IRS sends the CP162C notice when one of the following happens:

• Late or incomplete filing: The partnership or S corporation’s return was either filed late or did not include all necessary information.
• Failure to file electronically: Certain partnerships and S corporations are required to file their returns electronically. If this is not done, the IRS will assess a penalty.
• Missing tracking report: A partnership tracking report, which is necessary for the IRS to track the partnership’s details, was not filed as required.

The notice will set forth the reason for the penalty, along with the amount due and the steps you must take to resolve the issue. It’s crucial to act promptly to avoid additional penalties or interest charges.

What should you do if you receive a CP162C notice?

There are a few different courses of action depending on whether you agree with the penalty or believe it was assessed in error.

1. If you agree with the penalty

If you believe the penalty is correct and you are responsible for the filing issues, you will need to submit any missing information as quickly as possible. The IRS will continue to assess the penalty until it receives the necessary documentation. The penalty can be applied for up to 12 months, so it’s important to take swift action to minimize any further charges.

You can also request penalty abatement if you believe you had a reasonable cause for filing late or missing information. The IRS allows for written explanations of reasonable cause to be submitted. If the IRS agrees with your explanation, they may remove the penalty.

2. If you disagree with the penalty

If you believe the penalty was wrongly assessed, you have the right to challenge it. An authorized officer or partner can call the IRS at 800-829-0922 to discuss the penalty and your options. Be sure to have supporting documentation on hand, such as proof of timely filing, or an extension request. If the penalty was for missing information you believe wasn’t required, you’ll need to explain why you think the missing data was not necessary.

The IRS will notify you if it accepts your explanation. In some cases, the penalty may be reversed or reduced.

3. Small partnership exception (Rev. Proc. 84-35)

For partnerships with 10 or fewer partners, there’s an important exemption under Revenue Procedure 84-35. If you meet specific criteria, you may qualify for a penalty waiver. These conditions include:

• • All partners are either natural persons other than non-resident aliens or estates of natural persons.
  • Shares are proportionate among partners.
  • No election has been made for consolidated audit proceedings under §§6221-6234.
  • All partners reported their share of partnership items on timely filed returns.

If your partnership meets these criteria, you must submit a statement signed under penalty of perjury to request that the penalty be removed. This exemption may provide significant relief for small partnerships subject to filing penalties.

How are these penalties calculated?

Penalties for late or incomplete filings are assessed at $255 (for returns required to be filed in 2026 for the 2025 tax year) per partner or shareholder per month for up to 12 months. This amount is adjusted for inflation annually so that the penalty may increase in future years. The penalty is imposed for each partner or shareholder listed on the return, meaning that the total penalty can add up quickly, especially if the entity has many members.

How to get help from the IRS

If you're feeling stuck or need guidance on how to navigate a CP162C notice, you're not alone. Here's how you can get the support you need:

• Small partnerships: If your partnership doesn't have a designated tax-matters partner, any of your partners can call the IRS for assistance. It is advisable to have your partnership details and relevant documentation ready when you call.
• Partnerships with a tax-matters partner: Only the tax-matters partner or an authorized representative (with Form 2848) can reach out to the IRS. If your partnership has a designated person to handle this, ensure they’re the one who contacts the IRS for the most efficient service.
• Corporations: For corporations, any officer authorized to bind the company can contact the IRS. If you prefer to have someone else handle it, make sure they have Form 2848, Power of Attorney and Declaration of Representative, on file.

The IRS is equipped to guide you through the process, but be sure to have all your documents and details in hand to make the conversation smooth and efficient.

Wrapping up your CP162C notice

Receiving a CP162C notice from the IRS is a serious matter, but it doesn’t have to be a stressful one. By understanding why the notice was issued and what steps you must take, you can resolve the matter promptly and avoid further penalties. Whether you agree with the penalty or believe it was assessed in error, acting quickly is essential. Remember, the IRS is there to assist, and there are multiple ways to resolve the issue and proceed.