No. The IRS says you do not need to reply, but you should check your records to see why your deposits were incorrect.

How is CP276B different from CP276A?

IRS procedures say CP276B is issued when the penalty was computed using a valid liability schedule and waived. CP276A is issued when the liability schedule itself was missing or unacceptable.

Should I send a re-designation of deposits?

No. IRS procedures say the taxpayer is not required to send a deposit re-designation schedule, since the penalty was not assessed.

What would the penalty have been?

IRC 6656 sets it at 2, 5, or 10 percent of the late amount depending on how many days late, and 15 percent in some cases after an IRS delinquency notice or demand.

Will this affect First Time Abate later?

Possibly. First Time Abate looks at penalty history for prior periods. Treat a waived penalty as a warning and fix the deposit timing now so the next one is not charged.

Do I need to correct anything on the return?

The IRS says to correct your own copies of the return and tax liability schedule for your records. It does not ask you to send anything.

IRS CP276B: Late Federal Tax Deposits, Penalty Waived This Time

CP276B says your federal tax deposits were late or short, but the IRS waived the penalty this time. What it means and how to avoid a real penalty next time.

What CP276B means

CP276B says the IRS did not receive the correct amount of timely federal tax deposits. Normally it charges a federal tax deposit penalty when that happens. This time, it decided not to.

The IRM's title for the notice says it in plain words: You Made One or More Late Federal Tax Deposits, but We Didn't Charge You a Penalty. IRM 20.1.4.19 explains that CP276B is issued when the deposit penalty is computed at $5 or more using a valid liability schedule, and the calculated penalty was not charged but waived.

It is an educational notice. No response is required. No payment is due.

Why the IRS sends it

The IRM is candid. In the past, taxpayers weren't told when a deposit penalty was waived, so they didn't realize they were doing something wrong. They were later penalized on a subsequent period. CP276B exists so you learn about the problem while it is still free.

This is the cheapest lesson the IRS will ever teach you about payroll deposits. The next one has a price.

What "late" means here

Because CP276B uses a valid liability schedule, the IRS was able to compare the date each liability arose with the date each deposit arrived. Something did not line up. One or more deposits came in after their due dates, or the amounts deposited by a due date were short of what was required.

The usual culprits:

Depositing monthly when your lookback figure made you a semiweekly depositor.
Missing the $100,000 next-day rule during a large payroll.
Holiday weeks that shifted the deadline and nobody adjusted.
A payroll provider that changed its processing calendar.
Cash flow. Deposits made when money was available rather than when they were due.

The deposit rules, briefly

The IRS's CP276B page summarizes them. Your schedule depends on the lookback period. A total tax liability of $50,000 or less in the lookback period means monthly deposits, due by the 15th of the following month, or the next business day if the 15th falls on a weekend or holiday. More than $50,000 means semiweekly deposits: taxes for paydays on Saturday through Tuesday are due the following Friday, and for paydays on Wednesday through Friday, the following Wednesday, with an extra business day for each intervening holiday.

Treas. Reg. 31.6302-1 adds the one-day rule. Once an employer accumulates $100,000 or more of liability, the deposit is due the next business day, and a monthly depositor becomes a semiweekly depositor for the rest of the year and the next.

What to do now

The IRS lists the steps:

Review your records to see whether you are paying current payroll taxes on time.
Correct your copies of the return and liability schedule for your records.
Check your current deposits to verify they are correct.
Review the IRS's employment tax instructions and Publication 15.

IRS procedures add that you don't need to send a schedule re-designating deposits to lower the penalty, because the penalty was not assessed.

Electronic deposits and the $2,500 rule

The IRS says deposits must normally be made electronically. If your tax liability is less than $2,500, you may send payment with your timely return. For timely quarterly returns, the IRS also allows payment with the return when liabilities never reached $100,000 in a deposit period and the prior quarter's liability was less than $2,500. Confirm the current rules in Publication 15.

What the penalty would have cost

IRC 6656 imposes the penalty unless the failure is due to reasonable cause and not willful neglect:

2 percent if the deposit is not more than 5 days late.
5 percent if it is more than 5 days but not more than 15 days late.
10 percent if it is more than 15 days late.
15 percent if the tax is not deposited within 10 days after the first IRS delinquency notice, or by the date the IRS demands immediate payment.

IRM 20.1.1.3.3.2.1 lists the deposit penalty among those eligible for First Time Abate when the criteria are met. Having had one waived may affect your options later, so treat this notice as a warning, not as a pass.

Build a deposit calendar

The fix is usually mechanical. Put every payday into a calendar with its deposit due date beside it. Mark holidays. Flag any payday that could push accumulated liability to $100,000. If you use a payroll provider, compare its deposit dates with your calendar for one full quarter. Most late deposits come from an assumption no one checked.

Then confirm your deposit schedule each year. The IRS sends courtesy notices like CP136B when the schedule changes, but the responsibility for using the right one is yours.

If cash flow caused it

Be honest about this one. Payroll taxes withheld from employees are trust fund taxes. When a business falls behind on them, the risk is not limited to deposit penalties. The people responsible for paying can be held personally liable under the Trust Fund Recovery Penalty. If the business is using withheld taxes to cover other bills, stop now. See our guide to the Trust Fund Recovery Penalty.

Keep this notice

Store CP276B with the return for that quarter. If a deposit penalty is charged on a later period and you ask for relief, the IRS will look at your history, and you will want to show what you changed after this warning.

What not to do

Do not send a payment. None is due. If you already did, check where it was applied.

Do not assume the next late deposit will be waived.

Do not leave the deposit calendar to memory. Put every deadline in the system you actually use.

The law behind CP276B

IRC 6656 imposes the failure to deposit penalty and its percentage tiers. Treas. Reg. 31.6302-1 sets the monthly, semiweekly, and one-day deposit rules. IRM 20.1.4.19 describes CP276B as an educational notice issued when a deposit penalty computed with a valid schedule is waived. IRM 20.1.1.3.3.2.1 covers First Time Abate.

If late deposits are a symptom of a bigger cash problem, call us at (813) 229-7100 before the penalties start sticking.