Understanding your CP162B notice

What this notice is about

We charged you a penalty because:

• your partnership or S corporation return was incomplete or,
• you didn't file  your return electronically, as required.

What you need to do

• If you agree with the penalties, mail your full payment to us by the date shown on your letter to avoid additional interest charges.
• If you think we incorrectly charged a penalty and you meet any of the criteria below, an authorized officer or partner can call us at 800-829-0922 to discuss the account:
  • We charged a penalty against the partnership for failure to file electronically and it has fewer than 101 partners or it received a waiver of the requirement to file electronically for the year in question. Be prepared to provide a copy of the waiver or evidence of the number of partners in the partnership at any time during the year.
  • We charged a penalty against the partnership or S corporation for failure to include all required information on its return and you believe the missing information wasn’t required. Be prepared to explain why the missing information wasn’t required.
• If we correctly charged the partnership or S corporation a penalty for failure to include required information, you should submit the missing information as soon as possible. The penalty continues to accrue until we receive the missing information, for up to 12 months. If you believe the partnership or S corporation had reasonable cause for not including the information, send a written explanation with the missing information, signed under penalty of perjury. Mail your documents to the IRS office where you filed the return. We’ll notify the partnership or S corporation if we accept your explanation.
• If the partnership is a small partnership of 10 or fewer partners and we assessed a penalty for filing late or for failure to include required information, it may qualify for a waiver of the penalty under Revenue Procedure (Rev. Proc.) 84-35.
  • Note: For the purpose of this penalty a Real Estate Mortgage Investment Conduit (REMIC) is treated as a partnership, and a REMIC return (Form 1066) is treated as a partnership return.

Revenue Procedure 84-35

Reasonable cause for failure to file a timely and complete partnership return will be presumed if the partnership (or any of its partners) is able to show that all of the following conditions have been met:

• The partnership had no more than 10 partners for the taxable year. (A husband and wife filing a joint return count as one partner.)
• Each partner during the tax year was a natural person (other than a non-resident alien), or the estate of a natural person.
• Each partner’s proportionate share of any partnership item is the same as his proportionate share of any other partnership item.
• The partnership did not elect to be subject to the rules for consolidated audit proceedings under Internal Revenue Code (IRC) Section 6221 through 6234.
• All partners reported their distributive share of partnership items on their timely filed income tax returns.

If all of the above conditions are met, you may return this notice with your statement, signed under penalty of perjury, that you qualify to have the penalty removed for reasonable cause under the provisions of Rev. Proc. 84-35.

The penalty can be reasserted if it was removed based on a statement with respect to Rev. Proc. 84-35, and it is later determined that such statement was false in any material respect. Additionally, a penalty for making false statements may be asserted under IRC section 7206.

You may want to

Take necessary steps to prevent a similar penalty in future years.

Frequently asked questions