Notice 972CG: Responding to a Proposed Information Return Penalty

A Notice 972CG, Notice of Proposed Civil Penalty, tells a business or individual payer that the IRS intends to assess penalties for information return failures: late filing, missing or incorrect taxpayer identification numbers, or failure to file electronically when required.

It often arrives long after the returns were filed, and it can propose a substantial amount. It is also a proposal, with a built-in chance to respond before anything is assessed. That chance has a short clock.

Why it arrives so late

IRM 4.19.25.2 says Notice 972CG is mailed annually, normally the year after the return processing year. The manual's example: information returns for tax year 2023 are filed in 2024, and the notices for that year are mailed in 2025.

That delay means you may be responding about a filing season that happened a year or more earlier. Pull your records for that season before you write anything: the transmittals, filing confirmations, correction filings, and any correspondence with payees.

The deadline

IRM 4.19.25.2 says taxpayers are allowed 45 days to respond to the notice, or 60 days if overseas, to explain why the penalty should be waived. You can also pay if you agree in full or in part, or sign a consent allowing the IRS to bill you.

If you need more time, ask. IRM 4.19.25.7.6 says that when a taxpayer requests more time, the IRS sends Letter 1948C granting an additional 30 days, and that if the taxpayer requests a specific number of days or a specific date, the IRS grants it up to 90 days from the date of the notice. Ask in writing, and ask for the date you actually need.

Check the facts first

Not every proposed penalty is right. Before arguing reasonable cause, compare the notice to your records:

• Were the returns actually late? Electronic filing confirmations and transmittal records show when they were received.
• For TIN penalties, the notice includes a listing of the payee records at issue, on paper or on a CD or DVD for larger volumes. Check each one. Some may have been corrected, or the TIN on file may have been right.
• Were the failures corrected within the periods that reduce the penalty under IRC 6721(b), or within the de minimis rules of IRC 6721(c)?

Factual errors are the cleanest disagreement. Document them precisely.

What your response must include

If you are asking for a waiver, IRM 4.19.25.8 says the written statement must:

• State the specific provision under which the waiver is requested, which is IRC 6724(a) and Treas. Reg. 301.6724-1.
• Set forth all the facts alleged as the basis for reasonable cause.
• Contain the signature of the person required to file the return.
• Contain a declaration that it is made under penalties of perjury.

The manual notes that an appropriate signature on the partial agreement or disagreement sections of the notice is acceptable because the declaration is printed on the notice, and that a faxed signature is acceptable. If items are missing in a current-year reply, the IRS sends Letter 1948C asking for them.

Your facts should answer the two-part test: that you acted in a responsible manner before and after the failure, and that there were significant mitigating factors or events beyond your control. The information return penalty waiver guide lays out what counts for each.

Address both halves of acting responsibly

The manual says the IRS tests acting responsibly with two questions: did you react timely when you discovered the error, and did you take action to prevent it from recurring? It also notes that Notice 972CG does not explain these requirements in detail, so many responses miss one of them.

Do not be one of those. State what you did when you discovered the problem, with dates. Then state what you changed: a new payroll provider, a calendar control, TIN matching before filing, a second reviewer. If you leave out prevention, the manual says the IRS will look at your next year's filing to decide, and a repeat of the same error will count against you.

TIN penalties need solicitation proof

If the penalty is for missing or incorrect TINs, the response needs to show you made the required solicitations. IRM 4.19.25.8.3 explains that the regulations require an initial solicitation and, when a TIN is missing or incorrect, generally annual solicitations, and that annual solicitations must be by mail or telephone. Attach copies of the solicitation letters, mailing logs or call records.

The notice for TIN penalties includes Publication 1586, which explains these requirements. Read it before you respond.

Partial agreement is an option

You do not have to fight every line. IRM 4.19.25.2 says taxpayers may submit a payment if they fully or partially agree, or sign a consent allowing the IRS to send a bill for the balance. A common, sensible response agrees to the penalty on returns that truly were late without excuse and contests the rest with documentation.

That approach has a practical benefit. It shows the reviewer you are being straight about the failures you own, which makes your explanation for the others more credible. It also narrows the dispute to the items where your facts are strongest.

A hypothetical response outline

A hypothetical landscaping company receives a 972CG proposing penalties for late Forms 1099-NEC and for 14 payees with incorrect TINs. A focused response might include:

• A cover statement identifying the notice, tax year and EIN, requesting waiver under IRC 6724(a) and Treas. Reg. 301.6724-1, signed by an officer under penalties of perjury.
• For the late filing: the bookkeeper who handled 1099s was hospitalized in January, the owner discovered the problem in early February, and the returns were filed within ten days. A clean filing history for prior years. A new procedure requiring a second person to confirm filing by mid-January.
• For the TINs: copies of Forms W-9 collected at engagement for 11 of the 14 payees, showing the TINs the company used; copies of the annual solicitation letters mailed to the other three; and confirmation that the company now uses TIN matching before filing.

Each element maps to the regulation. That is what makes it reviewable.

No phone shortcut

IRM 20.1.1.3.1 says requests for relief from information return penalties cannot be considered orally or without an authorized signature; a written statement signed under penalties of perjury is required. A call can get you an extension or information. The waiver itself goes in writing. See requesting penalty abatement by phone for what the phone can and cannot do.

After you respond

If the IRS accepts your explanation, the proposed penalty is reduced or not assessed. If it does not, the penalty is assessed and you receive a notice, typically with a denial letter explaining the decision.

Keep copies of everything you sent and proof of when you sent it. If relief is denied, read the letter for your appeal rights and the deadline, and see appealing a penalty abatement denial. If you paid the penalty and later want it back, a refund claim must be filed within the statutory period.

Forty-five days goes fast for a business in the middle of its own operations. Put the deadline on the calendar the day the notice arrives. If the people who handled the filing have left, or the payroll vendor has changed, start gathering records immediately, and ask for the extension before the first deadline passes, not after.