A CP107 notice means the IRS changed your return because it found a miscalculation, and your balance due changed as a result. This notice relates to Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.
What to Do
- Read the notice carefully and compare its figures with your return.
- If you agree, correct the copy of your return and keep the notice with your records.
- Pay the amount due by the payment due date on the notice.
- If you can't pay in full, contact the IRS about payment arrangements.
If You Disagree
Contact the IRS within 60 days of the notice date. Have your account information ready when you call.
Penalties and Interest
This is where the cost adds up:
- Interest on the deposit. Interest accrues on the unpaid deposit amount from the day the deposit was due until the IRS receives it in full.
- Interest on the penalty. If you don't pay the penalty within 10 days of the notice date, interest starts accruing on the penalty too.
- Failure-to-deposit penalty. When a proper tax deposit isn't made, even because of an error, the IRS assesses a 10% failure-to-deposit penalty. You may or may not have received a notice of that penalty before this one.
- Additional 5%. If you pay the unpaid tax by the payment due date on this notice, no additional penalties are assessed on the amount you owe. If you don't pay the total tax due by that date, the IRS adds another 5% penalty on top of the 10% failure-to-deposit penalty.
Getting the Penalty Removed
If you think the penalty is an error, or you had reasonable cause for not making the proper deposit, you can ask the IRS to remove it. The penalty notice explains your right to appeal.
Next Time
File electronically, review the return for accuracy before you file, and make deposits on time and in the right amount.
If you received a CP107 notice and want the penalties reviewed, call us at (813) 229-7100.