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The IRS sends Notice CP162 when it assesses penalties for partnership, S-corp, and Real Estate Mortgage Investment Conduits (REMIC) returns that were late, incomplete, or not filed electronically. The notice outlines your penalties and explains what you should do next.
If you’ve received Notice CP162 from the IRS, the tax attorneys from The W Tax Group can help you request penalty abatement and get back into compliance. To get help, contact us today.
If you agree with the penalties assessed on the notice, you should pay your penalty by the due date. You can pay online through the EFTPS system, or mail a check using the voucher with the notice.
Note that even if the penalties were applied correctly, you may still want to apply for penalty abatement. The IRS tends to be particularly forgiving for first offenses.
If you received the notice because your return was late or incomplete, you should file your return immediately or provide the IRS with the information it needs to complete your return. If you disagree with the notice, you should reach out to a tax attorney or call the IRS at (800) 829-0922.
The IRS sends Notice CP162 when it assesses penalties to partnerships, S-corps, and REMICs for the following reasons:
Partnership and S-Corp returns are due by the 15th day of the third month after the end of the tax year. If you use the calendar year, your return is due March 15th. You may have received this notice if you filed your return after that date.
If you did not include the required information on your tax return, the IRS may send you Notice CP162. You are required to include all of the information listed on the instructions for your return. To get an overview of the required information, you can check out the instructions for Form 1065 (U.S. Return of Partnership Income), the instructions for Form 1120-S (U.S. Income Tax Return for an S-Corp), or the instructions for Form 1066 (U.S. Real Estate Mortgage Investment Conduit REMIC Income Tax Return).
Partnerships and S-corps with over 100 partners or members must e-file their returns unless they have a waiver. If you were supposed to e-file and you paper filed, the IRS may assess a penalty and send you this notice.
The right response to Notice CP162 depends on your situation. Here is an overview of how to respond to Notice CP162.
A tax attorney from The W Tax Group can help you decide how to respond to Notice CP162. They can help you complete your return, request penalty abatement, or take other steps to get back into compliance with the IRS.
If you have a designated tax matters partner, they should respond to this notice. Otherwise, any partner or corporate officer authorized to bind the corporation can call. If you want to have a tax attorney or someone else respond to the IRS, you will need to authorize them using Form 2848 (Power of Attorney and Declaration of Representative).
Notice CP162 will outline the penalties that have been assessed on your account. As of 2022, the penalty for filing a late or incomplete partnership return is $210 per partner per month, up to 12 months. Depending on your number of partners and how late you file, the penalty can grow very large very quickly. For example, a 10-member partnership that files six months late may incur penalties of $12,600.
If you are required to file electronically and you don’t, the penalty is $260 per partner over the 100-partner threshold. For instance, if you have 105 partners and you didn’t e-file, the penalty would be five times $260 or $1300. Note that all of these penalty amounts are indexed to inflation and subject to change.
Note that the IRS will provide e-filing waivers to S-corps or partnerships experiencing a hardship that prevents them from e-filing. Ideally, you should apply for the waiver before you file, but if you’ve already been assessed the penalty, you can request abatement retroactively.
Interest will accrue on the assessed penalties until they are paid.
If you want to request penalty abatement related to the penalties outlined on Notice CP162, you should send the IRS a list of the penalties you want to be abated and an explanation of why the IRS should remove the penalties. If the IRS believes that you had reasonable cause for the actions that lead to the penalty, the agency will remove the penalties.
The IRS will assume that a partnership had reasonable cause to submit a late or incomplete return if the following conditions are met:
If you meet these criteria, note that you are applying for penalty abatement under the rules of Rev. Proc. 84-35. If the IRS removes penalties based on this rule and then realizes that you made a false statement, the penalties will be reassessed along with an additional false-statement penalty.
If you receive Notice CP162, you should respond promptly. Failure to respond can lead to additional penalties or other issues with the IRS. At The W Tax Group, we have extensive experience helping businesses deal with the IRS.
You don’t have to respond to Notice CP162 on your own. Instead, get help now — contact us at The W Tax Group today.
