What CP268 means

CP268 says the IRS made changes to your business return because it believes there is a miscalculation, and that the change leaves you with a potential overpayment credit.

The IRM title is Math Error, Credit Offset Notice. It notifies you of an error on the return and possible misapplied payments that resulted in an overpayment, and gives you the opportunity to tell the IRS whether the math error is valid and how the credits should be applied.

Unlike most math error notices, this one comes with money on your side of the ledger.

Why you got it

When a return is processed, the IRS checks the arithmetic and the way amounts carry from schedule to form. If something does not compute, the IRS corrects it. On a CP268, the correction, combined with the payments on the account, produced an overpayment. Common examples include an addition error, a credit carried to the wrong line, or deposits that were higher than the return reflected.

The 30-day call

The IRS tells you to call the toll-free number on your notice within 30 days to request a refund check or to apply the credit to other types of tax or tax periods. Internal procedures say the notice requires a response and is worked on an expedited basis.

The IRS says you will receive the refund in four to six weeks if you respond within 30 days and owe no other taxes or debts it is required to collect.

The IRS found money in your favor. Do not lose it to inattention.

What to do now

  1. Read the explanation. The notice explains the change. Identify the line and the amount.
  2. Compare with your return. Recalculate the item. Decide whether the IRS's math is right.
  3. Check the payments. Match the credits on the account to your deposit records. A payment that belongs elsewhere can inflate the overpayment.
  4. Decide: refund or apply. The IRS says you can have the overpayment refunded or applied to other taxes or periods. If another period has a balance, applying the credit there may save penalties and interest.
  5. Call within 30 days. Then correct your copy of the return.

If the math correction is wrong

Sometimes the IRS's correction is itself the mistake. A number may have been transcribed wrong from a paper return, or a schedule may not have been considered. Call the number on the notice and explain. Have the return, the schedules, and the source documents ready.

For income tax returns, IRC 6213(b) gives you a specific right. You can file a request for abatement of a math error assessment within 60 days after the notice is sent, and the IRS must abate it. Any reassessment then has to go through the normal deficiency procedures. That protection applies to the taxes covered by the deficiency rules, so check whether your return is one of them.

If a payment is missing or misapplied

The IRS says to contact it at the toll-free number on the notice with your information. A representative will discuss the issue and give further instructions. If a deposit landed in the wrong quarter or on the wrong form, the IRS can move it with a credit transfer. Ask for confirmation of exactly where each payment ends up.

Refund or credit forward?

Applying the overpayment to another period is often smarter than taking the check. If another quarter or another tax type shows a balance, moving the credit there stops interest and penalties from growing on that balance. If the business expects to owe estimated tax or deposits soon, applying the credit can reduce what it has to send. If neither is true, take the refund. Whatever you choose, tell the IRS within the 30 days and get confirmation of where the money went.

Offsets

An overpayment is not always paid out. IRC 6402(a) allows the IRS to credit it against other federal tax liabilities and refund only the balance. If the business owes on another period, expect the IRS to apply the credit there.

Direct deposit next time

The IRS's CP268 page includes a practical tip. To get a refund by direct deposit next year, complete Form 8050, Direct Deposit of Corporate Tax Refund, and attach it to Form 1120 or Form 1120-S.

The IRS also points employers to Publication 15, Employer's Tax Guide, and Publication 4169, the tax professional guide to the Electronic Federal Tax Payment System. Both help prevent the deposit errors that lead to these notices.

How to avoid the next one

  • Reconcile deposits to the return before filing. Totals on the return should match the deposit history.
  • File electronically. Software catches arithmetic errors that paper does not.
  • Keep a deposit log by form and period.
  • Review the return's schedules against the main form before signing.

What not to do

Do not ignore CP268 because it is good news. If you need the credit moved, the 30 days matter.

Do not accept a math correction you believe is wrong just because it favors you this time. The same error can work against you on the next return.

Do not cash a refund you cannot explain.

If credits are mismatched but there was no math error, the IRS sends CP267 instead. For general math error notices on individual returns, see our guide to IRS math error notices.

The law behind CP268

IRC 6402 governs credits and refunds. IRC 6213(b) sets the math error procedure, including the 60-day abatement request, for taxes subject to the deficiency rules. IRM 21.3.1.7.41 describes CP268 and its expedited handling, and IRM 21.7.11.4.9 covers the CP267 and CP268 excess credit notices together.

If you want help confirming where an overpayment belongs, call us at (813) 229-7100.