IRS notice guide

Notice 972CG: the proposed information-return penalty, explained

Written by CompDefend. Founded by Umair Nazir, EA — Enrolled Agent, federally licensed to practice before the IRS. Last updated 2026-08-23.

Notice 972CG is the IRS's Notice of Proposed Civil Penalty for information returns, such as your 1099s and W-2s, that were filed late, filed on paper when electronic filing was required, or filed with a missing or incorrect payee name and taxpayer identification number (TIN). The word that matters is proposed: nothing has been assessed yet and no interest is running. You have 45 calendar days from the notice date (60 if you are a foreign filer) to agree, partly agree, or show reasonable cause in writing. If you do nothing, the full amount is assessed and a bill (CP15 or CP215) follows.

Notice 972CG in brief

It proposes a penalty under Internal Revenue Code section 6721; it is not a bill. The bill, a CP15 or CP215 notice, comes only after the penalty is assessed.
It covers three failures: filing late, not filing electronically when you had to, and missing or incorrect name/TIN combinations. Only one section 6721 penalty applies per return, at the highest rate that fits.
Respond within 45 calendar days of the notice date (60 for foreign filers). You may ask in writing for more time before the period ends.
A reasonable-cause waiver needs a signed written statement, made under penalties of perjury, showing you acted responsibly before and after the failure. For TIN failures, that means you requested the TIN the way the regulations require, for the year being penalized.
Per-return rates for returns due in 2026 run from $60 to $340, and $680 for intentional disregard, with annual caps that depend on your three-year average gross receipts.

Notice 972CG at a glance

What it is: The IRS Notice of Proposed Civil Penalty for information returns (1099s, W-2s and similar forms) under Internal Revenue Code section 6721. It proposes a penalty; it does not assess one, and it is not posted to your IRS account.
Why it was sent: IRS records show information returns that were filed late, filed on paper when electronic filing was required, or filed with a missing or incorrect payee name/TIN combination, or some combination of these. It is normally mailed the year after the returns were processed.
Who receives it: Any business or other payer required to file covered information returns, including Forms 1099-NEC, 1099-MISC, and W-2. Federal agencies receive a different notice (972F).
Tax type involved: Civil penalty under IRC 6721 on information returns; not income tax or employment tax. It is separate from the backup withholding rules behind a CP2100.
Deadline: Publication 1586: "The notice must be answered within 45 calendar days (60 calendar days for foreign filers) from the notice date." A written request for more time must reach the IRS before that period ends; the IRM allows one extension.
If it is ignored: The full proposed penalty is assessed and a balance due notice (CP15 or CP215) is issued with appeal rights. Interest accrues from the date of that notice unless the penalty is paid within the window it states.

What Notice 972CG is, why it was sent, and what "proposed" means

The IRS generates Notice 972CG systemically once its records show information returns that were late, on the wrong medium, or carrying name/TIN combinations that do not match. Publication 1586 says it "proposes an IRC 6721(a) penalty for information returns that were filed late, filed on incorrect media, filed with a missing or incorrect TIN, or a combination of these failures," and where TINs are involved it lists each mismatched return. IRM 4.19.25.2 says the notice "is mailed out annually, normally the year after the return processing year," so the notice date and listed filing year must be checked rather than inferred. It is not a bill. Publication 1586 states that interest accrues only "from the date of the CP15/CP215 Notice" that follows an assessment. Two boundaries matter. Some commercial pages present the 972CG as only an Affordable Care Act (Form 1095) penalty; Publication 1586 does not limit it that way, and covered returns include Forms 1099 and W-2. And it covers only section 6721, the return filed with the IRS, not the separate section 6722 penalty for statements furnished to payees.

The failure types a 972CG can cite (IRM 4.19.25.2)
Failure	What it means for a business	Typical cause
Failure to timely file	The return reached the IRS after its due date. IRM 4.19.25.8.1 lists January 31 for Forms W-2 and 1099-NEC, and February 28 (paper) or March 31 (electronic) for most other information returns.	Contractor totals tallied late; a January bookkeeper change.
Failure to file electronically	You filed on paper when e-filing was required. As of tax year 2023, a filer with 10 or more total information returns must e-file unless the IRS granted a Form 8508 waiver.	Counting only 1099s, when W-2s and every other information return count toward the same total.
Missing or incorrect name/TIN	The payee name and TIN do not match IRS records, or the TIN is missing or obviously wrong (fewer than nine digits, or letters).	No Form W-9 on file; a trade name paired with a personal SSN; a typo when filing.

How serious it is, and how long you have

IRC 6721 per-return penalty and annual cap, small-business filers (average annual gross receipts of $5 million or less over the three most recent tax years)
Return due in	Correct return within 30 days	31 days late through August 1	After August 1 or not filed	Intentional disregard
2026	$60 per return; $239,000 annual cap	$130; $683,000 cap	$340; $1,366,000 cap	$680; no cap
2025	$60; $232,500 cap	$130; $664,500 cap	$330; $1,329,000 cap	$660; no cap
2024	$60; $220,500 cap	$120; $630,500 cap	$310; $1,261,000 cap	$630; no cap

These figures come from Publication 1586, IRM 20.1.7 and the IRS penalties page. The rate is keyed to the year the return was due, not the year of the payments. Filers above $5 million in average gross receipts face higher caps ($683,000, $2,049,000 and $4,098,500 for returns due in 2026); the notice decides which class you are in, and IRM 4.19.25.7.1.14 has examiners research a disputed large-business label, so dispute a wrong one. Three more rules shape the total. Only one section 6721 penalty applies per return even when several failures do, at the highest rate that fits. The de minimis rule exempts the greater of 10 returns or one-half of one percent of all the information returns you had to file, if you filed on time and corrected the errors by August 1, and a dollar error of $100 or less ($25 for withheld tax) needs no correction unless the payee asks. Intentional disregard, which IRM 20.1.7.8.2 reserves for a filer who "knowingly or willfully" ignored the requirement, carries $680 per return for 2026 with no cap, and in some cases more. A documented response therefore matters beyond this year's dollars: it is the record that you are not a filer who disregards the rules.

What to gather, how to respond, and what happens next

The response file

The complete notice, including the name/TIN listing and the payment/correspondence slip.
Your copy of each return for the year cited, with the IRS received date.
Every Form W-9 (or substitute) for the listed payees, with the date you received it.
Any CP2100 or CP2100A for the same payees and the B notices you sent, with dates.
Records of any other TIN request by mail, phone or electronic system, with dates.
Your total count of information returns of all types for the year (e-file threshold and de minimis count) and your three-year average gross receipts (the cap).
A dated, plain-language account of what went wrong: a payee who refused to respond, a preparer's failure, or that this was the first year you ever had to file this type of return.

Responding to the notice

Reconcile the TIN list line by line.Publication 1586 gives the decision path. If the listed name/TIN agrees with your records, the payee gave you bad information and you must make the annual solicitation by December 31 of the year you are notified (January 31 of the next year if notified in December), even if you simply pay. If it disagrees, no solicitation is required; determine instead whether you made an entry error, your records changed after filing, or the IRS misread the return. Use the correct combination on every future return, and file Form W-2c if the mismatch is an employee's SSN.
Check the counts before you argue anything.The response page offers fully agree, partially agree, or totally disagree. Several reductions need no reasonable-cause argument: returns you were not required to file, the de minimis rule, an IRS processing error, or a large-business label you can rebut. For the e-file failure, IRM 4.19.25.8.2 says the penalty "applies to the number of information returns over the applicable threshold," so check the notice's count. Sign the slip that fits and pay any part you agree with.
Build the reasonable-cause statement to the required pattern.Under Treas. Reg. 301.6724-1 you must show both that you acted responsibly before and after the failure and that there were significant mitigating factors (never having had to file that type of return before, or an established history of correct filing) or events beyond your control (a payee who gave you nothing or a wrong number). Mitigating factors alone are not enough. Publication 1586 says the statement must name the provision relied on, set out every fact, state that the required TIN solicitations "took place in the time and manner required by regulations," carry the signature of the person required to file, and declare that it is made under penalties of perjury. Late filing and paper filing each need a separate written explanation.
Use your CP2100 work, and do not attach W-9s.A CP2100 and a 972CG come from the same mismatches under different code sections. Publication 1586 states that if you received a backup withholding notice for the same payee in the same calendar year, or for the same tax year's returns, and sent the required B notices, you are "not required to also make annual solicitations" under section 6724. Say so in the statement, but "do not submit copies of the TIN solicitations unless requested."
Know the letters that follow.Letter 1948C asks for more information and sets its own date; miss it and the waiver is denied. Closing Letter 6304C means reasonable cause was accepted. Letter 854C is a full or partial denial with appeal rights, followed by the CP15 or CP215 bill. The proposed notice never appears on your IRS account (IRM 4.19.25.2: it "is not posted to the master file"); an assessed penalty posts to a separate civil penalty module, so when you pull business tax transcripts, ask for that module, not only Form 941 or 1120-S.
Decide whether to involve a CPA, enrolled agent or attorney.Do so when the amount is large, intentional disregard is cited, you cannot produce solicitation records, a prior 972CG was assessed, or the same payees appear on a CP2100 and you have not been backup withholding, since a payer can be held liable for withholding it should have taken. Anyone who will argue your case needs a Form 2848 power of attorney; a Form 8821 only lets a third party read your account.

The process weakness behind the notice, and where Radar fits

Three layers of the contractor-reporting obligation
Layer	Information-return version	Where the 972CG finds the gap
Legal requirement	File each required information return by its due date, with the correct name and TIN, electronically when you file 10 or more returns of all types (IRC 6721; section 6011(e)).	The notice itself: late, paper, or mismatched.
IRS substantiation expectation	Be able to state, under penalties of perjury, that the TIN solicitations were made on time and in the required manner for the year penalized, and produce the records if Letter 1948C asks.	A waiver fails when the statement cannot truthfully say that, or the W-9 is missing or dated after the year in question; the solicitation relied on must be for the year penalized.
Defensibility control (prudent practice, not law)	No first payment without a W-9; check names and TINs through the IRS TIN Matching e-service before filing; keep a dated solicitation log; calendar January 31 and the August 1 correction cutoff; count every information return against the e-file threshold.	These reduce preventable filing and mismatch errors; they do not guarantee that no notice will issue. Publication 1586 presents TIN Matching as an option, not a requirement, and the IRS says a payer must already be in its Payer Account File, so a first-time filer may not be able to enroll yet.

A 972CG is a diagnostic: each listed failure maps to a control in how the business collects payee information, classifies workers, and files information returns. Review the same vendor records for worker-classification and payroll-deposit issues rather than assuming the problem stops with one filing. Separating law, IRS substantiation expectation and prudent control is the core of business tax defensibility. On scope: CompDefend Radar reads a domestic business's federal IRS account weekly under a Form 8821 authorization for three modules, Form 1120-S, Form 941 and Form 940. The proposed notice is not posted to those modules, and an assessed information-return penalty posts to a separate civil-penalty module that Radar v1 does not read, so Radar will not identify a 972CG or the CP15 or CP215 that follows. Account monitoring does cover activity on its three supported forms, including payroll-deposit penalties, the trust-fund indicator, new balances, and examination activity.

What to gather now

The full notice, including the name/TIN listing and the response slip
Filing confirmations showing the dates the IRS received each return
Forms W-9 and any other TIN solicitation records for every listed payee, with dates
Any CP2100/CP2100A for the same payees and the B notices you sent
Your total count of information returns of all types for the year, and your three-year average gross receipts

What to do now

Calendar day 45 (or 60) from the notice date
Compare the IRS listing with your payee records line by line
Decide per return: agree, partially agree, or request a waiver
Draft the signed reasonable-cause statement under penalties of perjury, with a separate explanation for any late or paper filing
Make the annual TIN solicitation the notice triggers by December 31 of the year you were notified (January 31 of the following year if notified in December), so next year's returns are protected

Bring in a CPA, enrolled agent or attorney if the amount is large, intentional disregard is cited, you cannot produce solicitation records, a prior 972CG was assessed, or the same payees are on a CP2100 and you have not been backup withholding. Representation before the IRS requires Form 2848, not Form 8821.

Where CompDefend fits — and where it does not

What CompDefend does

Scores contractor reporting and information-return practices as one domain of the free Business Tax Assessment, and lists the missing control in the remediation roadmap when that domain is weak.
Explains, in plain terms, the difference between a proposed penalty and an assessed one so you respond at the cheaper stage.
Monitors supported federal business-account modules (Forms 1120-S, 941 and 940) weekly under a Form 8821 authorization through CompDefend Radar, and surfaces new balances, penalties and examination indicators on those modules.
Points you to the primary IRS sources, including Publication 1586 and IRM 4.19.25, rather than paraphrasing them.

What CompDefend does not do

Monitor information-return civil penalty accounts. The 972CG is never posted to the IRS master file, and the assessed penalty and its CP15 or CP215 post to a module outside Radar v1's scope, so Radar will not alert you to them.
Draft or file your reasonable-cause statement, or represent you before the IRS. Form 8821 permits reading account information only; it is not a power of attorney.
Prepare or file information returns, run TIN Matching for you, or send B notices to your payees.
Predict whether a penalty will be waived or promise any IRS outcome.

See where your business stands

A 972CG can expose gaps in how payees are onboarded, classified, and reported. Once this notice is answered, the free assessment measures whether those neighboring domains are holding up.

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