What to do when your business gets an IRS or state tax notice

1. Find the notice number and response date. The notice number, such as CP161 or CP162A, is usually in the top or bottom corner. The date to respond or pay is on the first page.
2. Compare it with your records. Check the tax period, the return as filed and the payments you made.
3. Decide whether you agree. If you agree, pay or make the correction by the date shown. If you don’t, respond before the deadline with an explanation and documents.
4. Keep a copy of the notice and everything you send.

• CP162A: a penalty because a partnership or S corporation return was late, or was not filed electronically when required. For returns due in 2027, the late-filing penalty is $260 per partner or shareholder per month, up to 12 months.
• CP161: a balance due, usually because a return was filed without full payment. Contact the IRS within 10 days of the notice date if you think it is wrong.
• CP2100 and CP2100A: payee names and taxpayer identification numbers on your information returns are missing or don’t match IRS records. CP2100 goes to payers with 50 or more such returns and CP2100A to payers with fewer. You may need to send B notices and start backup withholding at 24% within 30 business days if a payee does not respond.
• CP2000: proposes changes to an individual return when income reported by third parties doesn’t match the return.

State notices from DC, Virginia and Maryland work the same way: read the tax type, period and response date, then compare with your filings.

First-time abate is administrative relief from failure-to-file, failure-to-pay and failure-to-deposit penalties, including partnership and S corporation late-filing penalties. It generally applies when the same type of return was filed on time for the prior three years and no penalties, other than estimated tax penalties, were assessed in that period. You must ask for it, by phone or in writing, including Form 843.

Reasonable cause relief may apply when the business used ordinary care but couldn’t comply because of events such as fires, natural disasters, death or serious illness, inability to get records, or system problems that prevented e-filing. The request should lay out the facts and dates.

With Form 2848, a CPA can represent your business before the IRS: call, write and negotiate on your behalf. For a corporation, an officer with authority to bind the corporation signs it. States have their own authorization forms.

We review the notice, pull IRS transcripts, prepare the response or penalty relief request, and follow up until the account reflects the result. For larger matters, see IRS tax resolution and IRS audit representation. Our fees are transparent and fair, quoted upfront, in writing.