Do I have to reply or pay?

No. The IRS says you do not have to reply, and its procedures describe CP276A as an educational notice issued when a deposit penalty was calculated but waived. Check your records to see why the schedule was wrong.

What is a tax liability schedule?

It is where you report your employment tax liability by payroll date or month: Part 2 of Form 941 for monthly depositors, or Schedule B for semiweekly depositors.

Why did the IRS reject my schedule?

The IRS says it rejects a schedule when the liabilities entered for each payroll date do not match the total liability reported on the return.

I paid after getting CP276A. What happens?

IRS procedures say that if a payment is sent because the taxpayer thought CP276A was a bill, the penalty is not assessed and the taxpayer is told it is an educational notice.

Will the penalty be waived next time?

Do not count on it. The IRS created these notices because taxpayers who were not told about waived penalties kept making the same mistake and were penalized later.

Where do I find the deposit rules?

Publication 15, Employer’s Tax Guide, explains the monthly and semiweekly schedules, the $100,000 next-day rule, and how to complete the liability schedule. Treas. Reg. 31.6302-1 is the underlying regulation.

IRS CP276A: Tax Liability Schedule Problem, Deposit Penalty Waived

CP276A says your employment tax return lacked a correct tax liability schedule, but the IRS waived the deposit penalty this time. What to fix next quarter.

What CP276A means

CP276A says the IRS did not receive a correctly completed tax liability schedule with your employment tax return. Normally that leads to a federal tax deposit penalty. This time, the IRS decided not to charge one.

The IRM explains the purpose. CP276A and CP276B are educational notices that don't require a response. They are issued when a deposit penalty is calculated but waived. In the past, the IRS did not tell taxpayers when it waived the penalty, so they didn't realize they were doing something wrong, and were penalized on a later return. These notices exist to stop that cycle.

IRM 20.1.4.19 says CP276A specifically is issued when an acceptable liability schedule was not provided with the return and the averaged penalty calculated was at least $5 and was waived.

Why the schedule matters

The IRS calculates deposit penalties by comparing when your tax liability arose with when your deposits arrived. To do that, it needs a schedule of your liability by date. Monthly depositors report liability for each month on Part 2 of Form 941. Semiweekly depositors report liability for each payday on Schedule B (Form 941).

When the schedule is missing or wrong, the IRS cannot match deposits to liabilities. Its fallback is to average the liability across the period, and an averaged calculation can show deposits as late even when they were not.

The deposit was probably fine. The paperwork describing it was not.

Why the IRS rejected yours

The IRS says it rejects a liability schedule when the liability you entered for each payroll date does not match the total tax liability on the return. Common causes:

Entering deposits on Schedule B instead of liabilities. The IRS says to show only liabilities, because it already has the deposit record.
Totals on the schedule that do not equal the total on line 12 of Form 941, often after a late payroll correction.
Using the monthly section when you were a semiweekly depositor, or the reverse.
Leaving the schedule off entirely.

What to do now

The IRS lists the steps:

Review your schedule. Enter the liability amount for each payroll date and see whether those amounts add up to the tax liability on the return.
Correct your copies of the return and schedule for your records.
Verify your deposit schedule for the current year.
Review the IRS's employment tax instructions and Publication 15.

The IRM notes the notice does not ask for a corrected schedule, since the penalty was already waived. It gives you the steps to get it right on future returns.

Monthly or semiweekly?

The IRS's CP276A page restates the rule from Treas. Reg. 31.6302-1. Quarterly filers look at the total tax liability for the four quarters before the quarter ending in September of last year. Annual filers look at the year before their previous filing year. A total of $50,000 or less means monthly deposits. More than $50,000 means semiweekly.

Monthly depositors deposit by the 15th of the following month, moving to the next business day if the 15th falls on a weekend or legal holiday. Semiweekly depositors deposit taxes for paydays on Saturday through Tuesday by the following Friday, and Wednesday through Friday by the following Wednesday, with an extra business day for each intervening holiday.

Electronic deposits

The IRS says deposits normally must be made electronically. It describes exceptions: you may send payment with a timely return when your liability is $2,500 or less, or, for a timely quarterly return, when your liability never reached $100,000 in a deposit period and the prior quarter's liability was $2,500 or less. Check Publication 15 before relying on an exception.

What the penalty would have been

IRC 6656 sets the failure to deposit penalty at 2, 5, or 10 percent depending on how late a deposit is, rising to 15 percent in some cases after an IRS delinquency notice or demand. It does not apply when the failure is due to reasonable cause and not willful neglect. The IRS's First Time Abate policy can also apply to the deposit penalty when its criteria are met. A waiver this time is a gift. Next time, the same error may produce a bill.

A quick self-check before you file next quarter

Confirm whether you are a monthly or semiweekly depositor for this year.
Use the matching section: Part 2 of Form 941 for monthly, Schedule B for semiweekly.
Enter liabilities, not deposits.
Make sure the schedule total equals the total liability on the return.
If you made a payroll correction during the quarter, reflect it on the date the liability changed.

Five minutes on this checklist prevents the averaged penalty calculation that produces most of these notices.

If you already paid

People sometimes mistake CP276A for a bill. IRS procedures say that if a payment is sent in response to CP276A because the taxpayer thought it was a bill, the IRS does not assess the penalty and tells the taxpayer it was an educational notice. If you sent money, check your account to see where it was applied.

Keep this notice

File CP276A with the return it relates to. If a deposit penalty shows up on a later quarter and you request relief, your history matters, and this notice is part of that history. It also shows that you were told about the schedule problem, which is a good reason to make sure the next schedule is right.

What not to do

Do not ignore the notice because no payment is due. The point of CP276A is to prevent the next penalty.

Do not list deposits where liabilities belong.

Do not let a payroll provider file schedules you have never reviewed.

The law behind CP276A

IRC 6656 imposes the failure to deposit penalty. Treas. Reg. 31.6302-1 sets the monthly and semiweekly schedules. IRM 20.1.4.19 describes CP276A and CP276B as educational notices issued when a calculated deposit penalty is waived, and explains how the IRS handles payments sent in response.

If deposit penalties keep showing up on your account, call us at (813) 229-7100.