Understanding Your IRS CP161 notice 

If you received a CP161 notice by the Internal Revenue Service, it indicates that there is a balance to be paid on your business tax account. This notice explains the tax you owe, payments you made, penalties, and interest. 

What is an IRS CP161 Notice?  

A CP161 IRS notice is sent to businesses to inform them that there is an unpaid tax balance on a specific tax form (such as Form 941), along with the applicable tax period. This balance may include original tax due, penalties, or interest charges. 

What you need to do immediately? 

• You must pay the full balance mentioned in the notice by the specified due date to avoid additional penalty and interest charges. 
• If you’re enrolled in the Electronic Federal Tax Payment System (EFTPS), you can conveniently pay your balance online instead of sending a check or money order. 
• Call the number provided on your notice (e.g., 1-800-xxx-xxxx) to discuss installment plans or other available payment arrangements for the remaining balance. 
• For the specified tax period, our records show no payments, deposits, or credits applied to this account. If you believe this information is inaccurate, please contact the number provided for assistance. 

Penalties: 

Failure-to-Deposit Penalty 

If you don’t pay the required tax by the IRS deadline, a failure-to-deposit penalty of up to 5% may apply. 

Failure-to-File Penalty 

• Charged at 5% per month (or part of a month) on the unpaid tax, up to 5 months. 
• If both late filing and late payment penalties apply, the filing penalty is reduced by the payment penalty for that month. 
• The late payment portion is 0.5% per month  

Failure-to-Pay Penalty 

• Charged at 0.5% per month (or part of a month) on unpaid taxes. 
• Applies even if you filed your return on time  
• Capped at a maximum of 25% of the unpaid tax  

Important Notes: 

• The due date of payment is usually the initial date of return that is due whether with or without extensions.  
• In case of the further tax, the payment should be paid within 21 days of the date of receipt of the notice (10 business days in case of the amount of 100,000 and more). 
• When the IRS gives a Notice of Intent to Levy without the payment within 10 days, the fine is raised to 1% per month.  
• The penalty can be lowered to 0.25% per month if you have an approved installment agreement. 

Penalty Removal or Reduction 

The IRS understands that certain circumstances may prevent timely compliance, such as: 

• Serious illness or injury  
• Death of a family member  
• Loss of records due to a natural disaster  

You may request a penalty abatement if you have a valid reason. 

How to Request Relief? 

To speed up the process, you can contact us with the following information: 

• Identify the specific penalty you want reviewed (e.g., late filing for a specific year)  
• Clearly explain your reason for requesting reconsideration. 

If submitting your request in writing: 

• Add a statement with signature.  
• Attach supporting documentation  

The IRS will examine your request and decide whether the explanation can be considered as reasonable cause to reduce or eliminate the penalty. 

Penalty Removal Due to Incorrect Written Advice from the IRS 

• If you received a penalty because you followed incorrect written guidance from the Internal Revenue Service, you may be eligible to have that penalty removed. 
• The IRS recognizes that taxpayers often rely on their official responses. If that guidance was inaccurate and directly led to the penalty, you have the right to request relief. 

Do you Qualify? 

You may be eligible for penalty removal if all of the following apply: 

• You requested written advice from the IRS about a specific tax issue  
• You provided complete and accurate details in your request  
• The IRS issued written guidance in response  
• You reasonably relied on that advice, and it resulted in a penalty  

How to Request Penalty Removal? 

To request abatement based on incorrect written advice, follow these steps: 

• Complete Form 843  
• Submit the form to the address listed on your IRS notice cp161. 
• Include any supporting documents, such as copies of the written advice you received.