IRS notice guide

IRS CP162: late, incomplete, and required e-filing penalties

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

CP162, and its variants CP162A and CP162B, is an IRS notice family for a partnership or S corporation return that was filed late, filed incomplete, or filed on paper when electronic filing was required. A late or incomplete Form 1065 or Form 1120-S penalty is figured per partner or shareholder, per month, for up to 12 months. A failure-to-e-file charge is a separate penalty under IRC 6721 with different counting rules. Verify which charge appears on the notice, then test the filing facts and the relief path that fits it.

CP162 in brief

The IRS now splits this notice family three ways: CP162 (return not e-filed as required), CP162A (return late, or not e-filed), and CP162B (return incomplete, or not e-filed). The notice variant identifies the trigger; it does not make the late/incomplete-return formula and the separate e-file formula interchangeable.
The formula comes from IRC 6698 (partnerships) and IRC 6699 (S corporations): a base amount, multiplied by every person who was an owner during any part of the year, multiplied by each month or part of a month the return is late, capped at 12 months. The base is indexed each year: the IRS CP162B page gives $245 for returns due in 2025, and the 2025 form instructions give $255 for returns due in 2026.
The only deadline is the date printed on the notice. The IRS says to pay by the date shown on the letter to avoid additional interest; no universal day count exists for CP162.
Relief depends on the penalty and facts: for an IRC 6698(a)(1) or 6699(a)(1) failure-to-file charge, check whether the 2026 Automatic Exemption from Penalty should have prevented assessment; then evaluate any transitional First Time Abate eligibility, Rev. Proc. 84-35 for qualifying small partnerships, and reasonable cause.
CompDefend Radar monitors the Form 1120-S account, so a late-filing penalty on an S corporation's return is within supported monitoring. Radar does not monitor Form 1065, so a partnership's CP162 is outside its current scope.

CP162 at a glance

What it is: A penalty notice charging a partnership or S corporation for a Form 1065, 1120-S or 1066 that was filed late (CP162A), incomplete (CP162B), or not electronically when required (CP162, CP162A, CP162B).
Why it was sent: IRS processing records show the return arrived after its due date including any extension, arrived without required information such as Schedules K-1, or arrived on paper when the e-file mandate applied. No examination is involved.
Who receives it: Partnerships, S corporations and REMICs, at the entity's address of record. The penalty is assessed against the entity, not the individual owners.
Tax type involved: Civil penalty on a pass-through return under IRC 6698 (partnerships) or IRC 6699 (S corporations), plus a separate e-file penalty under IRC 6721 when that applies. It is recorded on the entity's business account for the return period.
Deadline: The notice itself sets the date. The IRS says to pay "by the date shown on your letter to avoid additional interest charges"; if unpaid by that date, interest is charged from the notice date. No universal day count exists, and the IRS pages state no separate dispute window.
If it is ignored: Interest accrues from the notice date on the unpaid penalty. If the return is still unfiled or incomplete, the penalty grows each month per owner until filed or until 12 months from the due date. The balance stays open on the business account and can proceed to collection notices.

What CP162 is, and why the IRS sent it

The three CP162 notices, as the IRS describes them
Notice	What the IRS says triggered it	Example underlying fact
CP162	The return was not filed electronically, as required. Partnership, REMIC (Form 1066) and corporate returns.	The entity crossed the e-file threshold without noticing and mailed a paper return.
CP162A	"Your partnership or S corporation return was late or, you didn't file your return electronically, as required." Forms 1065, 1120-S, 1066.	No extension, a Form 7004 filed after the original due date, or a return that missed the extended date.
CP162B	"Your partnership or S corporation return was incomplete or, you didn't file your return electronically, as required." Forms 1065, 1120-S, 1066.	Schedules K-1 or other required information missing from the return as filed.

Commercial pages treat these as one notice; the sample CP162 the IRS publishes even bills the late charge and the e-file charge together, under different code sections. The penalty comes from processing records, not an examination, and three facts drive it. Due date: both returns are due the 15th day of the 3rd month after year end; for calendar-year 2025 returns the Form 1120-S and Form 1065 instructions both give March 16, 2026. Form 7004 adds six months to file, not to pay, and must be filed on or before the return's due date. E-file mandate: for returns filed on or after January 1, 2024, an entity that files 10 or more returns of any type during the calendar year must e-file, and a partnership with more than 100 partners must e-file regardless. Forms 941, 940, W-2, 1099 and the entity return all count toward the 10-return threshold. Dormant entities: an S corporation must file Form 1120-S every year its election is in effect, income or not; a shell that stops filing can draw a CP259 missing-return notice and then this penalty. A partnership need not file, per the Form 1065 instructions, only if it neither receives income nor incurs any expenditure treated as a deduction or credit.

How serious it is, and the deadline

Penalty paths that can appear in the CP162 notice family
Element	Rule	Source
Base amount	$195 in the statute, indexed for inflation and rounded down to a multiple of $5. $245 per person per month for returns due in 2025 (IRS CP162B page); $255 for returns due in 2026 (2025 instructions for Forms 1065 and 1120-S). Match the figure to the year the return was due.	IRC 6698(b), (e); IRC 6699(b), (e); IRS CP162B page; 2025 instructions
Who counts	Every person who was a partner or shareholder during any part of the tax year. An owner who left in February still counts.	IRC 6698(b)(2); IRC 6699(b)(2)
Months	Each month or part of a month, maximum 12. The sample notice: "We count a partial month as a whole month."	IRC 6698(a); IRC 6699(a); sample CP162
S corporation with tax due	Plus 5% of unpaid tax per month, up to 25%. A return required to be filed in 2026 that is more than 60 days late carries a minimum of the smaller of the tax due or $525.	2025 Instructions for Form 1120-S
Failure to e-file	A separate IRC 6721 penalty applies when a required electronic return was filed on paper. Under the general 10-return aggregate rule, the penalty applies to returns over 10; a partnership with more than 100 partners has a separate partnership rule based on partners and accompanying schedules above 100. Do not apply the monthly owner-count formula to this charge. Check the notice computation, current form instructions, and any approved waiver.	IRM 20.1.7.11; IRM 20.1.2.5; Form 1065 instructions; sample CP162
Assessment	Assessed against the entity. Deficiency procedures do not apply, so there is no pre-assessment notice to petition.	IRC 6698(c), (d); IRC 6699(c), (d)

Three shareholders and a 2025 return filed four months late, with no tax due, is 3 × 4 × $255, or $3,060. Twelve partners at the 12-month cap is $36,720. Some sites still quote $200 or $210 per person per month; those were earlier years' figures, so use the instructions for the year the penalized return was due. Separately, the 2025 instructions state a $340 penalty may be imposed for each Schedule K-1 (and K-3, if applicable) not furnished on time or not showing all required information.

What to gather before you call or write

Documents that decide a CP162 response

The complete notice, with its penalty computation table (months late, number of owners).
Proof of filing date: the e-file acceptance acknowledgment, or the postmark, certified-mail receipt or designated private delivery service record for paper.
The Form 7004 extension and its acceptance acknowledgment, with the date submitted.
An ownership roster for the year with the dates each partner or shareholder joined or left; the CP162A page says to be prepared to show the number of partners at any time during the year.
A tally of every return the entity filed that calendar year, if the e-file penalty is in question, plus any approved e-file hardship waiver.
The entity's account transcripts for the prior three years, to check the timely-compliance history administrative relief requires.
Evidence behind any reasonable-cause claim: medical records, disaster declarations, software-outage notices, correspondence.
A signed Form 2848 if a CPA, EA or attorney will call. Otherwise the IRS pages allow the tax matters partner, any partner of a small partnership without one, or an authorized corporate officer.

What happens next: a decision path

Working a CP162 in order

Confirm the facts the penalty rests on.Was the return actually late, or was a timely extension never matched to the account? Is the owner count right? Did the e-file mandate apply, or was a waiver on file? The CP162A page says to be prepared to fax documentary evidence of a timely extension or timely mailing, and to have a copy of any e-file waiver. Call the number on the notice (the IRS pages list 800-829-0922) with the return and account information in hand.
If the return is still unfiled, file it now.The sample notice is direct: "File immediately. We will increase the penalty for filing late each month until you file or until 12 months from the due date of your return, whichever occurs first." For a CP162B, the IRS page says the clock runs until the missing information is received.
If the penalty is correct, pick the strongest relief route.Start with the current IRS administrative-relief rules. The IRS began Automatic Exemption from Penalty (AEP) in summer 2026 for eligible original 2025 tax-year returns and later. If IRS records show the required three prior years of timely compliance, AEP should prevent an IRC 6698(a)(1) or 6699(a)(1) failure-to-file penalty during processing and the IRS sends a relief notice. If your notice assesses an otherwise eligible penalty, contact the IRS. During the transition, First Time Abate may still apply to periods not considered for AEP. Rev. Proc. 84-35 covers partnerships only: no more than 10 partners (a married couple filing jointly counts as one), each a natural person or the estate of one and not a nonresident alien, identical proportionate shares for every item, no election into consolidated audit procedures, and every partner's share reported on a timely return. You return the notice with a statement signed under penalty of perjury, which the IRS can reverse if the statement proves false. Reasonable cause is the remaining case-specific path. The IRS reasonable-cause page asks what happened, when, how it prevented filing, and what you tried. Reliance on a tax professional, lack of knowledge, mistakes, and lack of funds do not ordinarily qualify on their own; provide the underlying facts and documents.
Decide whether to pay while you wait.Paying stops interest and does not forfeit relief; the IRS accepts a written statement or Form 843 after payment. Not paying leaves the balance open on the business account, where it draws interest and can proceed to collection notices such as a CP504B. On an S corporation's Form 1120-S account, that penalty posting is activity CompDefend Radar surfaces in its weekly read: it shows that a penalty appeared, not which notice was mailed, and no deadline comes from the transcript. Radar does not monitor Form 1065 accounts.
Know when to hand it to a professional.A single-year penalty on a small entity with documented timely-compliance history may be resolvable by calling the IRS. Bring in a CPA, EA or attorney under Form 2848 for multiple open years, a large owner count, an e-file penalty on a partnership with more than 100 partners, a denied abatement, or unfiled returns that have also drawn CP259 notices. On a denial, the IRS penalty-appeal page says the rejection letter states your appeal rights and that you generally have 30 days from its date to request an appeal; the letter controls. Form 8821 does not let anyone represent the entity; only Form 2848 does.

The process weakness behind a CP162

A CP162 can reveal a calendar, counting, completeness, or handoff problem, and a relief request treats only the assessed penalty. The obligation has three layers. The legal requirement is to file by the 15th day of the 3rd month or extend by that date, to e-file once the entity crosses 10 returns or 100 partners, and to include every required schedule. The substantiation expectation is to be able to prove it: the acceptance record, the extension acknowledgment, the K-1 delivery log, and the ownership roster behind the head count. The defensibility controls below are not law; they are practices designed to reduce repeat failures, and they are the filing-discipline questions the free business tax assessment scores.

Controls that keep the next return off this list

One named person owns the filing calendar, with the original and extended due dates written down and Form 7004 submitted before the original date, not on it.
Extension and return acceptance acknowledgments go into the permanent file the day they arrive.
Each January, count the returns the entity will file that year; at 10, plan to e-file the 1120-S or 1065 instead of learning about the mandate from a notice.
Keep an ownership roster with entry and exit dates, reconciled to the K-1s issued; that roster is the multiplier on every penalty.
Log the date each Schedule K-1 was furnished to each owner.
A month or two after filing, confirm on the account transcript that the return posted and no penalty transaction appeared; weekly account monitoring under a Form 8821 authorization does this for supported modules.
Treat an S corporation as a filer every year the election is in effect; before a dormant partnership skips a year, confirm it had no income and no deductible expenditures.

What to gather now

The full notice, including the penalty computation table (months late and number of owners).
Proof of filing: e-file acceptance acknowledgment, or postmark or certified-mail receipt for a paper return.
Form 7004 extension and its acceptance record, if filed.
Ownership roster with entry and exit dates for the tax year.
Three years of account transcripts to confirm a clean compliance history.
Documentation of any reasonable-cause event, and any e-file hardship waiver.

What to do now

Check the facts: due date, extension, owner count, and whether the e-file mandate applied.
If the return is unfiled or incomplete, file or complete it immediately; the penalty grows monthly up to 12 months.
Check whether Automatic Exemption from Penalty should have prevented assessment; then evaluate transitional First Time Abate, qualifying Rev. Proc. 84-35 partnership relief, or reasonable cause.
Pay by the date on the notice if you want to stop interest while relief is considered; relief can still be requested by written statement or Form 843 after payment.

Bring in a CPA, EA or attorney under Form 2848 for multiple open years, a large owner count, an e-file penalty or waiver dispute, a denied abatement (the IRS says you generally have 30 days from the rejection letter to appeal; the letter controls), or unfiled returns that have also drawn CP259 notices.

Where CompDefend fits — and where it does not

What CompDefend does

Scores your filing discipline, extension tracking and owner-roster controls inside the free adaptive Business Tax Assessment, and returns a Federal Tax Defensibility Index, a defensibility measure rather than an audit probability, with the weak domains named.
Reads the Form 1120-S, 941 and 940 accounts weekly under a Form 8821 authorization through CompDefend Radar, so a new late-filing penalty on an S corporation's return can surface as account activity. The transcript does not establish when a related notice was delivered.
Explains what a penalty or balance transaction on the business account means and which underlying process it points to.
Documents S corporation owner compensation through a reasonable compensation study when that is the weakness a late return would expose.

What CompDefend does not do

Monitor Form 1065 partnership accounts. A partnership's CP162 is outside Radar's current supported scope.
Identify the specific notice and charge the IRS applied. Account activity shows that a penalty was assessed, not whether the IRS used CP162, CP162A or CP162B or which formula it applied, and no deadline is ever computed from a transcript; the letter controls.
Request penalty abatement, call the IRS, or represent the entity. Form 8821 permits reading account information only; representation requires Form 2848 and a credentialed professional.
Prepare or file Form 1065, Form 1120-S or Form 7004, or promise any IRS outcome.

See where your business stands

A CP162 can reveal a calendar or handoff weakness that may also affect payroll filings and information returns. Once the penalty is handled, the free assessment shows whether the same control gap exists elsewhere in the business's federal posture.

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