What This Notice Means

A CP207L tells you the deposit schedule filed with your employment tax return, called the Record of Federal Tax Liability (ROFTL), has missing or incorrect information. The IRS needs more from you before it can figure whether your deposits were on time.

A ROFTL gets rejected when entries are incorrect, missing, illegible, or negative, or when the total liability doesn't equal the total tax.

What to Do

Read the notice. Then complete a new ROFTL and mail it to the address at the top of the notice within 45 days of the notice date.

Build it correctly this time:

  • Monthly depositors list the total liability for each month.
  • Semiweekly depositors list the liability for each pay date.
  • Show liabilities, not deposits.
  • No negative numbers. Apply a decrease against the corresponding liability, never below zero, and move any leftover decrease to later liabilities.
  • The total must match the total tax liability on your return.

What Happens If You Don't Reply

The IRS spreads your total liability evenly across the period and applies your deposits to those averages in the order received. Then it charges penalties on amounts not properly or timely deposited: 2% for 1 to 5 days late, 5% for 6 to 15 days, and 10% for 16 days or more. Not using EFTPS when required is 10%. Not paying within 10 days of the first notice is 15%.

Averaging rarely matches your real payroll. A correct ROFTL is your best protection. A late reply still gets reviewed, but only after the penalty is assessed.

If You Missed a Deposit

The IRS won't consider removing deposit penalties until it has a correct ROFTL. If you had reasonable cause for one or more late deposits, include a statement signed under penalty of perjury with your reply.

Keep a copy of everything you send and use certified mail.

Next Time

Check that the ROFTL is complete, attached to the return, and totals to the total tax. Semiweekly depositors should follow the instructions for Schedule B (Form 941).

If you received a CP207L and want the deposit schedule fixed before penalties hit, call us at (813) 229-7100.