Getting an IRS notice about penalties can feel like a gut punch—especially when your business return didn’t even show tax due. IRS Notice CP162A is most commonly sent when the IRS assesses a late or incomplete filing penalty against a pass-through entity, like an S corporation (Form 1120-S) or a partnership (Form 1065).

The good news: CP162A is usually solvable. In many cases, the penalty can be reduced or removed if you qualify for penalty relief (such as reasonable cause or first-time abatement), or you may simply choose to pay and close the loop.

Below is a clear, CPA-guided walkthrough of what CP162A means, how the IRS calculates the penalty, and what to do next.

IRS Notice CP162A At a Glance

IRS Notice CP162A Explained, Part by Part

Even though layouts can vary slightly, CP162A notices tend to follow a predictable structure. Here’s what each section usually means.

Part 1: The summary and amount due on IRS Notice CP162A

You’ll typically see a short explanation at the top stating that the IRS charged your entity a penalty. Then the notice highlights the total amount due—often in large bold print—so you can’t miss it.

Part 2: The payment section (voucher/coupon) on IRS Notice CP162A

CP162A usually includes a detachable payment portion meant for paying by check. If you pay this way, your check memo line should generally match what the IRS requests (commonly your EIN, tax period, and form type) so the payment is applied correctly.

Part 3: What the IRS wants you to do next on IRS Notice CP162A

This section lays out the IRS’s preferred outcome: pay by the deadline shown (or contact them if you dispute the charge). The notice will also outline payment methods and where to send correspondence.

Part 4: What happens if you do nothing on IRS Notice CP162A

If the IRS doesn’t hear from you, it generally treats the balance as valid and continues collection activity (including adding interest and sending follow-up notices).

Part 5: The penalty math on IRS Notice CP162A

This is where the notice usually shows how the IRS calculated your penalty—based on how many owners you had and how late the return was.

Part 6: Contact info and next-step guidance on IRS Notice CP162A

The last portion typically includes phone numbers, general instructions, and reminders about penalty relief and your rights.

When the IRS Sends Notice CP162A

You can receive CP162A when the IRS believes your S corp or partnership return was:

• Filed after the due date (including after extension, if it was still late), or
• Missing required information (treated as incomplete), or
• Not filed electronically when the IRS considers e-filing required for your situation.

Often, CP162A arrives after the IRS finishes processing the return and posts the penalty to the entity’s account.

How the CP162A Late-Filing Penalty Is Calculated

For pass-through entities, this penalty is not based on tax due the way it is for many individual filers. Instead, it is generally calculated as:

Monthly penalty rate (per owner) × number of owners (K-1s) × number of months late (max 12)

Current per-owner monthly amounts (common IRS reference)

The IRS publishes a “base penalty rate” schedule for partnership/S-corp late filing penalties.

Important nuance: The IRS schedule is tied to the return due date period, not necessarily the tax year name you use in conversation. A CPA can match your exact due date and compute it correctly.

What You Should Do If You Receive CP162A

Step 1: Verify the IRS is right before you pay IRS Notice CP162A

Start by confirming the basics:

• Was the return actually filed late (or was an extension filed)?
• Do you have proof of e-file acceptance (or certified mail tracking, if paper)?
• Does the IRS count of owners/partners match your K-1s?
• Was the return considered “complete” when filed?

IRS systems and postings can be wrong. Catching an error early can save you money and time.

Step 2: If the penalty is correct and you can pay, consider paying to stop the drip

If you agree with the balance and cash flow allows, paying in full is often the cleanest way to prevent additional interest and close the matter.

If you’re unsure whether you should pay first or dispute first, get professional guidance—timing and documentation matter.

Step 3: Request penalty relief (abatement) if you have grounds

Two of the most common pathways are:

• Reasonable cause relief – If something outside your control caused the late or incomplete filing, you may be able to request removal. (The law for partnership penalties specifically includes a reasonable-cause exception.)
• First-time abatement (FTA) – In many cases, the IRS can waive certain penalties when you have a strong compliance history and meet their criteria.

Practical tip: Even when you’re requesting relief, the quality of your explanation and supporting documents can make or break the outcome.

Step 4: If paying in full isn’t realistic, build a resolution plan

If the penalty is valid but payment would strain the business, your next move is to choose the best path forward—often one of these:

• A structured payment approach (when available), or
• A temporary pause in collection when financial hardship is documented, or
• Other resolution options based on the entity’s situation and the owners’ broader tax picture.

The right option depends on what’s owed, why it happened, and what the business can sustain.

Why Work With a CPA Firm, Not Just a Tax Relief Company

CP162A penalties sit at the intersection of tax compliance (filing accuracy, deadlines, e-file rules) and tax controversy (abatement requests, IRS communications). A CPA firm is built for that.

A reputable CPA team can:

• Reconstruct what happened (extensions, acceptance records, entity history)
• Calculate the penalty correctly and challenge incorrect assumptions
• Prepare a well-supported abatement request (not a generic template)
• Help you fix the underlying processes so the problem doesn’t repeat

Just as important: Corridor Consulting CPAs isn’t a “tax relief mill.” We provide resolution help and ongoing tax/accounting support so your business stays compliant long-term.

How Corridor Consulting CPAs Can Help With CP162A

From Cedar Rapids and across Eastern Iowa (and nationwide), we help S corps and partnerships respond to IRS notices with a plan that fits the business—not a one-size-fits-all script.

With CP162A specifically, our team can:

• Confirm whether the IRS penalty is valid
• Identify the strongest abatement strategy (reasonable cause vs. administrative relief)
• Handle IRS calls and correspondence through proper authorization
• Coordinate the next steps so this doesn’t turn into a recurring annual penalty cycle

Take the First Step Toward IRS Tax Relief

If you received IRS Notice CP162A, you don’t have to guess your way through it. The fastest path to relief is usually a calm review of the filing facts, the owner count, and your eligibility for penalty removal.

Corridor Consulting CPAs can help you understand what the IRS is claiming, what’s actually true, and what your best next step is—so you can move forward with confidence.

Resources: Learn More About IRS Notices and Your Rights

• Understanding Your CP162A Notice
• Administrative Penalty Relief (First Time Abate)
• Failure to File Penalty (Partnership Returns)
• Instructions for Form 1065
• Information About Your Notice, Penalty and Interest (Notice 746)