TC 270: Manually Assessed Failure to Pay Penalty

What the code actually does

TC 270 posts a failure-to-pay penalty that was computed by hand. IRS Document 6209, Section 8A (the IRS’s reference guide to its data-processing codes) describes it as the “manual computed Failure to Pay Tax Penalty assessed if return liability and/or Examination/DP tax adjustment is not paid on or before date prescribed for payments,” and then records the consequence that makes the code matter: on both BMF and IMF, it “restricts penalty computation for this module.” The penalty itself is the ordinary one under IRC 6651(a)(2) and (a)(3) — half a percent a month on unpaid tax. What is unusual is not the charge but that a person calculated it, and that the calculation displaced the system.

IRM 20.1.2.2.5 names it in exactly those terms, listing “TC 270/271—manual assessment/abatement of the penalty for failure to pay” as the manual counterpart to the systemic TC 276/277 pair. Manual TC 270 restricts penalty computation for the module, and the computer-generated TC 276 does not.

Why a manual assessment happened at all

The IRM treats this as a departure from the preferred path. IRM 20.1.2.2.5 opens by observing that “in most conditions, IRS’s computer systems are able to accurately compute and assert the correct penalty” for failure to file and failure to pay, and concludes that “therefore, it is important that taxpayer accounts are not unnecessarily restricted from systemic penalty computation.” A TC 270 therefore signals that something about the module defeated the automated computation.

The subsection lists when a manual adjustment is actually required, and the triggers are worth recognizing on sight: when the computer is unable to compute the penalty correctly or is already restricted from computing it; when a withholding credit or a Regulated Investment Company credit is adjusted through a prompt or quick assessment, in which case “the FTP penalty must be manually recomputed and adjusted to ensure an accurate notice of the adjustment”; and where a penalty increase requires a copy of the computation to go to the taxpayer under IRC 6751. It also states the tie-break when the two disagree: “when there is a difference between computer generated and manual computations, manual computations take precedence after the accuracy of the manual computation has been verified.” The verification clause is the practitioner’s opening — precedence is conditional on the computation having been checked.

The zero-dollar TC 270

A TC 270 for no money is not an error, and misreading it is a real risk. Doc 6209 records that a return posted with condition code “Z” generates a TC 270 for zero amount on IMF, and IRM 20.1.2.2.5 treats a zero-amount entry as a deliberate device elsewhere in the same family, noting that a zero TC 162 “may be used to allow systemic computation of the FTF penalty.” A zero TC 270 does the opposite of nothing: it restricts the module without charging anything, which means the failure-to-pay penalty on that account has stopped updating itself.

The practical consequence is that a client with a zero-dollar TC 270 may be quoted a balance that has not moved in months while the underlying liability is still unpaid. There is no penalty accruing systemically to reveal the gap, and the next manual entry can arrive as a surprise. Confirming whether a module is restricted is therefore part of quoting any payoff figure, not a separate exercise, and it is one of the few things on a transcript that changes what a balance means rather than what it is.

What people mistake TC 270 for

People confuse TC 270 with the systemic assessment of the identical penalty, TC 276 — whose own abatement code, TC 277, is on this site — because the two produce the same charge under the same statute and read the same way on a balance-due account. The difference is who made the entry and what follows: a TC 276 is the computer’s own assessment and leaves the module computing normally, while a TC 270 is a person’s figure and switches that computation off. A practitioner who assumes the penalty will keep updating itself after a TC 270 posts will misjudge both the current balance and how any later abatement has to be requested.

People also read it as interchangeable with TC 160, the manually assessed failure-to-file penalty, since both are hand-computed debit penalties that arrive together on a late-filed, unpaid return. They are separate penalties under separate provisions — TC 160 reaches the late-filing penalty, TC 270 the late-payment penalty — and each has its own relief analysis. Winning relief on one does not carry to the other, and a request that names only “the penalty” on a module carrying both will not resolve either cleanly.

What to do next

Establish which trigger produced the manual assessment, because the answer determines whether the figure is a considered computation or an artifact of a prompt assessment done for statute reasons.

Verify the amount rather than the entitlement first. The IRM gives manual computations precedence only once their accuracy has been verified, so an arithmetic challenge sits on firmer ground than an argument about whether the penalty should apply.

Check whether the module is restricted and note it before quoting any payoff, since a restricted module’s failure-to-pay penalty is not updating on its own.

Run the relief analysis for the late-payment penalty separately from any late-filing penalty on the same module — the Penalty Abatement Analyzer tests First-Time Abate and reasonable cause against the specific penalty rather than the account.

If the balance is not going to be paid soon, weigh whether the right outcome is abatement at all or an installment agreement, since the failure-to-pay penalty rate falls from 0.5 percent to 0.25 percent a month while an installment agreement is in effect, for an individual who filed on time, including extensions (IRC §6651(h)).

On a 2025 or later tax-year return or a 2026 or later quarterly return of a form listed in IRM Procedural Update SBSE-20-0626-0643, check for Automatic Exemption from Penalty (AEP) before you request relief: an unreversed TC 971 action code 996 on the return’s own module shows that the IRS already granted AEP or a prior First-Time Abate there, and the IRS grants AEP when, among other conditions, an unreversed action code 995 sits on each of the prior three years’ modules (12 consecutive quarters for quarterly returns) and the taxpayer filed the return within three years of its original due date, but not when an unreversed 996 sits on any of those modules.