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 required to be filed in 2026, the general penalty is $340 per return, reduced to $60 if corrected within 30 days or $130 if corrected by August 1 of that year — with an annual cap that depends on the partnership's gross receipts (a lower cap applies at $5 million or below). Intentional disregard of the requirement removes the caps and reduced tiers 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 can clear the more-than-100-partner test and still be required to e-file because of the second, aggregate-return test.

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, there is no month-by-month accrual described on this notice — it is a fixed per-return charge based on when (or whether) the paper return was ultimately corrected to electronic filing.

The practitioner's actual next step

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 a materially harder standard 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 e-filing on Form 8508 before the deadline (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.

What CP162 gets confused with — and why the distinction matters

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 a flat per-return amount 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.

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 the fastest 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 return was filed; CP162A is about when it was filed.

Common Questions