A CP162 series notice says the IRS charged a penalty on a partnership or S corporation return. Depending on the version, the return was late, incomplete or not filed electronically when it had to be. These penalties are calculated per owner and per month, so they can grow quickly for entities with several partners or shareholders. The good news is that several forms of relief are built into the process.
The notices
| Notice | What the IRS says |
|---|---|
| CP162 | Penalty because the return was not filed electronically, as required |
| CP162A | Penalty because the return was late or not filed electronically |
| CP162B | Penalty because the return was incomplete or not filed electronically |
| CP162C | Penalty because the return was late or incomplete, the partnership tracking report was not filed, or the return was not filed electronically |
REMIC returns on Form 1066 are treated as partnership returns for this penalty.
How the penalty is figured
The IRS's penalty page explains that the monthly penalty is the base rate multiplied by the number of people who were partners or shareholders at any time during the entity's tax year. The cap is 12 months. The base rate is $255 for returns due after 12/31/2025 (2026) and $245 for returns due in 2025, per the IRS. The rate is adjusted for inflation each year.
Example (hypothetical). A two-shareholder S corporation due to file in 2026 files three months late. The penalty is $255 x 2 shareholders x 3 months = $1,530, plus interest. The same S corporation filing four months late with four shareholders would owe $255 x 4 x 4 = $4,080. The figure on your notice controls, and it may reflect a different count of months or owners.
Relief you can ask for
- Electronic filing penalty. The IRS says the penalty may be removed if the partnership has fewer than 101 partners or received a waiver of the electronic filing requirement. Be ready to provide the waiver or evidence of the partner count.
- Return was actually timely. Provide evidence, such as a timely extension or proof of timely mailing.
- Reasonable cause. If you could not obtain required information through no fault of your own, send a written explanation, signed under penalty of perjury, to the IRS office where the return was filed. The IRS notifies you if it accepts it. See reasonable cause penalty relief.
- Small partnership (Rev. Proc. 84-35). Reasonable cause is presumed if the partnership, or any partner, can show all of these: no more than 10 partners (a married couple filing jointly counts as one); every partner is a natural person who is not a nonresident alien, or the estate of one; each partner's share of every partnership item is the same proportion; the partnership did not elect the consolidated audit rules; and all partners reported their shares on timely filed returns. Return the notice with a statement, signed under penalty of perjury, that you qualify. The penalty can be reinstated if the statement is false in a material way, and false statements may be penalized separately.
Who can contact the IRS
For a small partnership with no designated tax matters partner, any partner may call. Otherwise the tax matters partner, or someone authorized on Form 2848, may call. For a corporation, an authorized officer, or someone the chief officer authorizes on Form 2848. See Form 2848.
If information is missing, and interest
On a CP162B or CP162C, submit the missing information as soon as possible, because the penalty keeps accruing for each month it stays missing, up to 12 months. Interest accrues on unpaid penalties, so pay by the date on your letter if you agree. See S corporation and partnership late filing penalty.
Common mistakes
- Paying without checking whether relief applies.
- Counting owners incorrectly. Anyone who was a partner or shareholder at any time during the year counts.
- Signing a Rev. Proc. 84-35 statement without confirming every condition.
When to involve a CPA
A CPA can check which relief fits, prepare the statement or written explanation, and make sure the next return is on time. See partnership taxes and S corporation taxes. Our business tax preparation team handles Forms 1065 and 1120-S.
How we can help
We can review the notice, confirm the owner count, and prepare the abatement request. See our IRS representation services or contact us.
Frequently asked questions
How long does the penalty keep growing?
For up to 12 months, according to the IRS, for each month or part of a month the return is late or the information is missing.
Do I have to ask for relief?
The IRS notices describe steps you take to request it, such as a call, a statement or a written explanation, so plan to ask. Some relief is available for small partnerships.
What is the difference between CP162 versions?
They describe different reasons for the penalty, as in the table. Read the reason on your notice.
Official sources
- IRS: Understanding your CP162 notice
- IRS: Understanding your CP162A notice
- IRS: Understanding your CP162B notice
- IRS: Understanding your CP162C notice
- IRS: Failure to file penalty
This page is a plain-language summary. The official source controls if there is any difference.
General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.