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CP173 notice: what it means and what to do
Got an IRS CP173 notice? Here is what it means, your deadline, what to check before you answer, and how to reply. Check your own letter free: it stays on your phone.
Check my CP173 notice freeWhat the IRS says this notice is about
We assessed a penalty for failure to make sufficient timely estimated tax payments because our records show you didn't prepay enough of your tax through estimated tax payments or didn't make them on time.
Corporations generally must make estimated tax payments if they expect to owe tax of $500 or more when their return is filed.
What you need to do
- Read your notice carefully. It will explain how much you owe and how to pay it.
- Pay the amount you owe by the due date on the notice.
- If you receive income unevenly during the year, you may be able to avoid or lower the penalty by annualizing your income and making unequal payments. Use Form 2220, Underpayment of Estimated Tax by Corporations .
Your deadline
Answer by the date printed on your notice. If there is no date, answer as soon as you can, and call the number on the notice if you need more time.
What to check before you answer
You may be able to remove the penalties
If you had no penalties in the 3 tax years before, filed all required returns, and paid or arranged to pay the tax, the IRS First-Time Abatement policy can remove failure-to-file and failure-to-pay penalties. You can ask in writing or by phone.
Cannot pay it all now? Ask for a payment plan
You can apply for a payment plan on irs.gov. Interest keeps running until the balance is paid, so pay what you can now.
Is this letter really from the IRS?
The IRS writes first by mail. A real letter shows a notice or letter number, your name and part of your tax ID number. The IRS does not ask for payment by gift card, crypto or wire transfer. If in doubt, sign in to your IRS online account, where many notices are listed.
You may want to
Review Form 2220 to see if any of the exceptions for computing the penalty apply to you. If any of the exceptions apply, you may be able to lower or avoid the penalty by following the instructions for the given exception.
Note: Estates and most trusts review Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts .
Common questions
How do I have the penalty adjusted?
We may reduce or remove the penalty if any of the following apply:
- The corporation owed less than $500.
- You can supply cancelled checks or other documentation to show the amount and date you made estimated tax payments.
- The corporation is a member of a consolidated group figuring its first required installment based on prior year’s tax.
If I have reasonable cause, can you remove or reduce the penalty?
We can't remove or reduce the penalty for reasonable cause. However, we can remove or reduce it to the extent it's directly attributable to erroneous written advice we gave you, if you meet the following criteria:
- The advice was in direct response to a written request for advice.
- The erroneous advice was not the result of material omissions or misinformation in the written request for advice.
- You reasonably relied on our written advice and were penalized based on that advice.
If you believe you meet the criteria above, you must mail a statement, signed under penalty of perjury, outlining how the erroneous advice resulted in the penalty. You must include a copy of both the written request for advice and a copy of the written advice you received in response to your request. Mail the statement and supporting documentation to the address listed on your penalty notice.
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