IRS notice
IRS Notice CP162: What It Means and How to Respond
A penalty charged to a partnership that filed its return on paper when the IRS says it was required to file electronically.
Reply by the date on the notice
Pay, or contact the IRS to dispute the penalty, by the date printed on your letter; the IRS page gives no fixed number of days, and interest is added if payment is late.
CP162 tells a partnership that the IRS charged a penalty because its return was not filed electronically as required. If the partnership was not actually required to e-file, or had a waiver, an authorized partner can call the IRS to dispute it; otherwise pay by the date on the letter and, if there was reasonable cause, ask in writing for the penalty to be removed.
What this notice is telling you
- The IRS processed a partnership return that was filed on paper and decided the partnership was required to file it electronically.
- A penalty has been assessed against the partnership, not against individual partners.
- For this penalty, a REMIC is treated as a partnership and its Form 1066 as a partnership return.
- The penalty can be challenged if the partnership was not required to e-file, held a waiver for the year, or had reasonable cause.
What to do
Check whether e-filing was required
Partnerships with more than 100 partners must e-file Form 1065 and its schedules. Since 2024, a partnership that files 10 or more returns of any type in the year (information, income, employment and excise returns combined) must also e-file.
Look for a waiver
If the IRS granted a hardship waiver of the e-file requirement for that year, find the waiver letter. Have it, or proof of the partner count during the year, ready before you call.
Call if the penalty is wrong
An authorized partner or officer can call 800-829-0922, the number the IRS lists for CP162, if the partnership had a waiver or was not required to e-file, or if it is a REMIC.
Pay if you agree
Mail full payment by the date on the letter to avoid additional interest. Paying does not prevent a later written request for abatement.
Fix next year's filing
Make sure the partnership's preparer files electronically from now on, or request a waiver before filing if hardship makes e-filing impossible.
The 10-return rule catches smaller partnerships
The IRS CP162 page still describes the partner count as the test, and partnerships with more than 100 partners have long been required to e-file. The Form 1065 instructions add a second test that started in 2024 under updated Regulations section 301.6011-3 (T.D. 9972): a partnership that files 10 or more returns of any type during the year must e-file. Forms W-2, 1099 series returns, quarterly Forms 941 and the Form 1065 itself all count toward that total, so a small operating partnership with a few employees can cross it without realizing.
Before disputing a CP162 on the ground that the partnership has fewer than 101 partners, count every return it filed for the year. If the total reached 10, the penalty may be correct even with only two partners.
Asking for abatement in writing
Where e-filing was required but something outside the partnership's control prevented it, the IRS accepts a written request to remove the penalty. Its guidance asks for:
- The heading Form 1065 Failure to e-file Penalty Abatement Request in large letters at the top.
- The partnership's name, federal tax ID number, mailing address and the tax year.
- A statement that establishes reasonable cause, such as hardship.
- A declaration signed under penalties of perjury by the partner authorized to act for the partnership.
- A valid power of attorney (Form 2848) if a preparer or adviser submits the request.
The IRS says it will send its decision within 30 days of receiving the request. Haigler CPA Group can prepare the request and correspond with the IRS for the partnership under Form 2848.
How CP162 relates to other partnership penalties
A partnership return can also draw a separate penalty for being filed late or missing required information, which is figured per partner, per month. The IRS notes that if information is listed in the return instructions as required, it must be included; if the partnership could not obtain it through no fault of its own, it can explain in writing and ask for a reasonable cause waiver. Read your notice to see which penalty was actually charged before you respond.
Want a CPA to deal with it?
Bring the notice to a free consultation, in person on James Island or by video. We read it with you, tell you what it means for your account and, if you want us to, take over the response once you sign Form 2848.
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Sources
By Haigler CPA Group. Updated . Notices are revised from time to time, so go by the wording and dates on your own notice. The information on this site is general in nature and is not tax, legal, or accounting advice for your situation. Tax law changes and the right answer depends on facts we would need to review with you. Please speak with a qualified professional before acting on anything you read here.
Questions about CP162
Our partnership has only two partners. How can we owe an e-file penalty?
Partner count is only one test. Since 2024, a partnership that files 10 or more returns of any type in the year, counting W-2s, 1099s and employment tax returns along with the Form 1065, must file electronically.
Who is allowed to call the IRS about a CP162?
The IRS says an authorized partner or officer may call. Anyone else, including a CPA, needs a Form 2848 power of attorney signed for the partnership.
Is the CP162 penalty charged to each partner?
No. It is assessed against the partnership and paid by the partnership, although its cost may end up shared economically among the partners.
Can we get a waiver for the return we already filed?
The IRS says a waiver of the e-file requirement may be granted before the return is filed if hardship is shown. After the penalty is assessed, the route is a written abatement request showing reasonable cause.
Other notices
- CP161: Unpaid balance on a business tax accountA bill for an unpaid balance on a business tax account, often after a return was filed without full payment or deposits came up short.
- CP259: Business return not filedThe IRS shows a business return as required for a period but not filed; there is one notice per form and period.
- IRS notice lookupEvery IRS notice carries a code. Find yours below to see what it generally means, which date matters, and what to do before that date passes.
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