IRS CP162
Penalty for Late Partnership or S-Corp Return
Your partnership or S-corp return was filed late — a penalty has been assessed.
Deadline
60 days to respond or request abatement
Respond within 60 days. First-time abatement may eliminate this penalty entirely for eligible filers — but only if you request it.
Respond promptly to protect your options and avoid escalation.
What IRS CP162 Means
CP162 is a penalty notice issued when a partnership (Form 1065), S-corporation (Form 1120-S), or certain other pass-through entity returns are filed late or with missing information. The penalty is calculated per partner/shareholder per month — making it a surprisingly large number for entities with multiple owners.
Under IRC §6698 (partnerships) and §6699 (S-corps), the IRS charges $235 per partner or shareholder per month (2024 rate) that the return is late, up to 12 months. A 10-partner LLC that files 3 months late, for example, faces $7,050 in penalties — before any other charges.
CP162 is one of the most commonly abated penalties because first-time abatement (FTA) is widely available and the penalty can be significant relative to the tax impact of these pass-through returns. A tax professional can often eliminate this penalty entirely on the first request.
What the IRS Can Do If You Don't Respond
- Assess the per-partner/per-month penalty as stated in the notice
- Accrue interest on the penalty from the due date of the return
- Escalate to collection if the penalty is not paid or contested
- Issue liens or levies against the partnership or its partners in extreme cases
What You Should Do Right Now
- 1
Verify that the return was actually filed late — check your confirmation receipt or postmark
- 2
If the return was filed on time, respond with proof of timely filing
- 3
If the return was late, evaluate first-time abatement (FTA) eligibility — if this is your first penalty in 3 years, FTA often eliminates the entire amount
- 4
If FTA does not apply, evaluate reasonable cause (natural disaster, serious illness, professional reliance) as grounds for abatement
- 5
Contact a CPA to draft and submit a penalty abatement request before the 60-day window closes
Resolution Options Available to You
Frequently Asked Questions About IRS CP162
How is the CP162 penalty calculated?
The penalty is $235 per partner or shareholder per month (2024 rate), multiplied by the number of months late, up to 12 months. So a 5-partner LLC that is 2 months late owes $235 × 5 × 2 = $2,350.
What is first-time abatement and do I qualify?
First-time abatement (FTA) is an IRS administrative waiver available to taxpayers with a clean compliance history — no penalties assessed in the prior 3 tax years. If this is your first late return, FTA can eliminate the CP162 penalty entirely with a simple request.
What if we filed on time but used an extension?
If you filed a timely extension (Form 7004), the return deadline is extended and CP162 should not apply. If the IRS assessed a penalty despite a timely extension, respond with proof of your extension filing.
Can the penalty be paid in installments?
Yes, but consider pursuing abatement first. If abatement is denied, you can set up a payment plan. Paying a penalty that could be abated is unnecessary.
Professional References
IRC: IRC §6698 — Partnership Return Late Filing Penalty; IRC §6699 — S-Corp Return Late Filing Penalty
IRM: IRM 20.1.2 — Failure to File Penalty — Partnership and S-Corp
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