How to answer Notice 972CG, step by step
Notice 972CG — "Notice of Proposed Civil Penalty" — proposes civil penalties under IRC §6721 for information-return failures. The response is a written statement addressing the penalty reason codes, the penalty computation, and — where applicable — reasonable cause. Here is the sequence, in order. (The IRS calls it Notice 972CG; practitioners say "Letter 972CG." Same document.)
- 1. Calendar the 45-day deadline
- 2. Transcribe the PRNs, counts, and proposed amount
- 3. Recompute the penalty tiers
- 4. File corrections as soon as possible
- 5. Build reasonable cause (the two-prong test)
- 6. Draft the written statement (four requirements)
- 7. Assemble and mail to the notice address
- 8. What comes back
- Common questions
1. Calendar the 45-day deadline
You have 45 days from the notice date (60 for filers outside the U.S.) to respond, with one written extension available — see What is Letter 972CG? for the full deadline and extension background.
Source: IRM 4.19.25.7.6.
2. Transcribe the PRNs, counts, and proposed amount
The notice lists one or more penalty reason codes (PRNs) identifying each failure the IRS found, with return counts and a proposed dollar amount. Copy these into your working file exactly as printed:
- PRN 500 — late filing.
- PRN 501 — failure to file electronically. For returns due in 2024 and later, filers with 10 or more returns must e-file (T.D. 9972).
- PRN 502 — missing or incorrect TIN.
- PRN 504 — late filing and failure to e-file.
- PRN 505 — late filing and missing/incorrect TIN.
- PRN 507 / 510 — other combinations of the above.
- PRN 537 — intentional disregard. Asserted manually by the IRS, not through the standard 972CG proposal process.
The PRN determines which facts your response has to address — a TIN failure (502/505) pulls in the solicitation regime of Reg. §301.6724-1(e), while a late-filing failure (500/504) turns on correction timing and reasonable cause. See What is Letter 972CG? and 972CG reasonable cause, explained.
Sources: IRM Exhibit 20.1.7-4 (PRN table); IRM 4.19.25.
3. Recompute the penalty tiers
§6721 per-return tiers are keyed to the calendar year the return was due in — not the tax year on the form. The per-return amount depends on when the failure was corrected:
- Returns due in 2025 (Rev. Proc. 2023-34): $60 if corrected within 30 days of the due date; $130 if corrected after 30 days but on or before August 1; $330 if corrected after August 1 or never.
- Returns due in 2026 (Rev. Proc. 2024-40): $60 / $130 / $340 across the same three correction windows.
- Returns due in 2024 (Rev. Proc. 2022-38): $60 / $120 / $310 across the same windows.
Then apply the annual caps, which differ by business size — "large" means average gross receipts over $5 million for the last 3 years. And check two limits: no more than one §6721 penalty per return, and intentional disregard carries a higher per-return amount ($660 for 2025 due-year returns; $680 for 2026) with no annual cap. §6722 furnishing penalties (the employee copy) are separate exposure at the same rates.
Sources: IRS — Information Return Penalties; Rev. Proc. 2023-34; Rev. Proc. 2024-40; Rev. Proc. 2022-38; IRC §6721.
4. File corrections as soon as possible
Correction timing matters twice: it sets the penalty tier and it feeds prong (B) of the reasonable-cause test (the regulation treats correction ordinarily within 30 days of discovery as the benchmark for responsible conduct). For Forms 1095-C, the correction mechanics are:
- Mark an "X" in the CORRECTED checkbox at the top of each corrected Form 1095-C.
- Include a Form 1094-C transmittal with the correction filing — the 1094-C itself is not marked corrected.
- Furnish a copy of the corrected 1095-C to the employee.
Corrections filed electronically generally must be e-filed. Log the dates — each correction's date determines its tier.
Sources: Reg. §301.6724-1; IRS — Instructions for Forms 1094-C and 1095-C.
5. Build reasonable cause (the two-prong test)
Relief runs through reasonable cause under Reg. §301.6724-1 — two prongs, both required: (A) significant mitigating factors or an impediment beyond your control, and (B) responsible action before and after the failure (extensions where available, prompt correction). For the full test, the solicitation regime for TIN failures, and worked examples, see 972CG reasonable cause, explained.
For TIN failures, the regulation adds a solicitation regime: the filer must have made an initial solicitation (generally a W-9 request) and annual solicitations thereafter. Relying on electronic-only processes is not sufficient.
One point to get right: First Time Abatement does not apply to information-return penalties (IRM 4.19.25.8(1)). Relief runs through reasonable cause.
Sources: Reg. §301.6724-1; IRM 4.19.25.8(1). Full walkthrough: 972CG reasonable cause, explained.
6. Draft the written statement (four requirements)
The written statement is the core of the response. Reg. §301.6724-1(m) requires four things — a statement missing any of them is procedurally incomplete:
- Cite the provision under which relief is sought.
- State all facts that establish reasonable cause — concrete events, dates, and why they prevented timely correct filing, not general assertions.
- Be signed by the filer.
- Include a declaration that the statement is made under penalties of perjury.
The statement should also address the penalty computation itself: which PRNs apply to which returns, the due-year tier math, and the annual caps. Facts that establish the computation and facts that establish reasonable cause travel in the same envelope.
Source: Reg. §301.6724-1(m) (eCFR).
7. Assemble and mail to the notice address
The response goes to the address printed on the notice — not a generic IRS service center. A complete packet typically contains: the written statement with its four required elements, supporting documentation (solicitation records, correction receipts, extension requests), and the penalty recomputation. Mail it with tracked delivery (certified or equivalent) and keep copies of everything sent, plus the tracking receipt. Respond by the printed response date — or by the extended date if Letter 1948-C granted an extension.
8. What comes back
After the IRS reviews the response, the next letter is typically one of two:
- Letter 1948-C — requests more information or confirms an extension.
- Letter 854-C — the waiver of penalty is disallowed, with appeal rights. A disallowed waiver can be taken to the IRS Office of Appeals.
If the deadline passes without a response, the penalty is assessed in full and billed as Notice CP15 or CP215.
Sources: IRM 4.19.25.
Common questions
IRM 4.19.25.7.6 frames the window as 45 days from the notice date (60 for filers outside the U.S.). In practice, the response date printed on your notice is the date that controls — confirm it and calendar it.
Yes — one extension is available on written request. The IRS answers with Letter 1948-C — a standard 30-day extension (up to 90 days from the notice date if specifically requested). The request must be in writing.
Correction timing sets the penalty tier (for 2025 due-year returns: $60 within 30 days, $130 by August 1, $330 after) and supports prong (B) of the reasonable-cause test. Corrections: X in the CORRECTED box on each 1095-C, a 1094-C transmittal not marked corrected, and a copy furnished to the employee.
No. IRM 4.19.25.8(1) states that First Time Abatement does not apply to information-return penalties. Relief runs through reasonable cause under Reg. §301.6724-1.
The proposed penalty is assessed in full and billed — typically as Notice CP15 or CP215. Relief can still be sought after assessment, but the pre-assessment response window is gone.
This guide is general information, not legal or tax advice. Statutes and IRS pages change — verify against the sources linked above.