CP162: What It Means and How to Respond

What the notice actually says

CP162 tells the partnership: "We charged you a penalty because you didn't file your return electronically, as required." Treas. Reg. §301.6011-3(c) is what routes this specific failure into the information-return penalty regime: a partnership that fails to e-file when required "will be deemed to have failed to file the return in the manner prescribed for purposes of the information return penalty under section 6721" — specifically IRC §6721(a)(2)(A), the failure-to-file-on-time-and-in-the-required-manner provision.

For a return due in 2026, the IRM sets $340 per partner over 100, capped at $1,366,000 ($4,098,500 if average gross receipts top $5 million). Intentional disregard of the requirement removes the caps entirely, with a $680 minimum penalty or 10% of the amounts involved, whichever is greater.

What actually triggered it

The trigger is the filing method itself, not the return's timeliness or accuracy. Treas. Reg. §301.6011-3(a)(1) requires electronic filing if the partnership has more than 100 partners during the year, or — a lower and easy-to-miss bar — if it's otherwise required to file at least 10 returns of any type during the year, counting employment and information returns alongside the partnership return itself. A partnership with 100 or fewer partners can still need to e-file under the second, aggregate-return test, but IRM 20.1.2.5 charges this penalty only for partners over 100, and the IRS notice tells a partnership with fewer than 101 partners to call.

Response deadline and what happens if you miss it

The notice states a payment due date, and interest accrues on any amount unpaid after it. Unlike the late-filing penalty on CP162A, this notice describes no month-by-month accrual. The IRM sets the charge per partner over 100.

What to do next

First-Time Abate does not apply here at all — the IRS's own penalty-relief guidance for this specific penalty says its relief criteria are not the same as First-Time Abate, and §6721 is absent from First-Time Abate's own eligible-penalty list. Reasonable cause is available, but under the §6724 standard that governs information-return penalties — materially harder than the ordinary-business-care test used elsewhere: the partnership must show either a significant mitigating factor (being a first-time filer, or having a compliance history) or a genuine impediment, and separately show it acted in a responsible manner — including making reasonable efforts to avoid the failure and correcting it promptly once discovered.

Two specific paths are worth checking before assuming the penalty stands: whether the partnership requested and was denied a hardship waiver from the e-filing requirement (the outcome posts to the account as a TC 971), and whether the partnership actually attempted to e-file and the IRS's own system failed to accept the return through no fault of the partnership — the IRS will waive the penalty on that basis alone.

One misconception is worth naming, because it sends the request to the wrong place: there is no numbered form for the partnership waiver. Form 8508 does not do this job. It is titled "Application for a Waiver from Electronic Filing of Information Returns," and its own list of covered returns runs to the W-2, 1099, 1098, 1042-S, 3921, 3922, 5498, 8027 and ACA 1094-C/1095 series — Form 1065 is not on it, and neither is Form 1120-S. The partnership mechanism is a written submission carrying the notation "Form 1065 e-File Waiver Request" at the top, sent to the Ogden submission processing center, per the IRS's own guidance on waivers for partnerships unable to meet e-file requirements. That guidance asks for the request at least 45 days before the return's due date including extensions, which makes it a planning step rather than a response to a notice already issued. Confirm the current mailing address, fax number and required contents against that page before sending, and call the number on the notice for anything the page does not settle.

What people mistake CP162 for

The critical mix-up is assuming CP162 is the partnership late-filing penalty — it isn't. CP162A is the notice for filing late (charged per partner, per month, up to 12 months); CP162 charges per partner over 100 for filing on paper instead of electronically, regardless of whether the return was on time. A partnership can receive one, the other, or both for the same return, and each carries entirely different relief rules — First-Time Abate reaches CP162A's late-filing penalty but never reaches CP162's e-filing penalty.

The second distinction is one of entity type, and it is invisible on the notice itself: everything on this page is the partnership rule. The parallel regulation, Treas. Reg. §301.6037-2(c), governs an S corporation's failure to e-file: it deems the corporation "to have failed to file the return" and points to §6651. The IRS has not said whether First-Time Abate or AEP reaches that charge, so ask the IRS before you request either. Do not carry this page's no-First-Time-Abate conclusion across to an S corporation; CP162B sets the two regulations side by side.

On a transcript, this shows up as TC 971 if a waiver was requested (Action Code 320 granted, 321 denied) and, once assessed, a TC 246 or TC 240 carrying penalty reference number 688 — a different reference number from the 722 code CP162A's late-filing penalty uses. Checking the reference number on the transcript is a direct way to confirm which penalty is actually in play; The Federal Tax Desk's TC Decoder will translate whichever code appears. In short: CP162 is about how the partnership filed; CP162A is about when it filed.

Common Questions