What CP 207 / CP 207L is
Issued on Forms 941, 943, 944, 945 and 1042 when the liability schedule is incomplete, illegible, negative, or does not add to the tax on the return. Gives 45 days; if a valid schedule is not on file by the 13th week the IRS assesses an "averaged" failure-to-deposit penalty that spreads the year's tax evenly across deposit dates, and "Reasonable cause cannot be considered or denied on an averaged FTD penalty assessment" until a valid schedule is supplied (IRM 20.1.4.18, 20.1.4.26.1). CP 207L is the large-dollar version ($75,000 or more), preceded by a phone call.
Where this sits: these notices come from the Form 945 side of the house, the return on which backup withholding is reported and deposited. The Form 945 page covers the account mechanics behind them.
The deadline
45 days to supply a corrected Form 945-A; assessment at week 15.
What to do
Send a corrected 945-A with liability dates (not deposit dates) that total line 3; a corrected schedule received even after assessment must be considered and the penalty recomputed (IRM 20.1.4.18.2). Then, and only then, argue reasonable cause or First Time Abate.
Why the IRS needs the liability schedule
A failure-to-deposit penalty cannot be computed from the return alone. The return shows how much tax was owed for the year and how much was deposited; it does not show when each dollar of liability arose, and the penalty depends on the gap between the day the tax was withheld and the day it was deposited. For a monthly depositor the return itself carries that information, as a liability figure for each month. For a semiweekly depositor, or any depositor who hit the $100,000 next-day rule, the detail lives on Form 945-A, which lists the liability by the day the withholding happened. If that schedule is missing, does not add to the tax on line 3, shows a negative day, or cannot be read, the IRS has no way to test the deposits against it. CP 207 is the request to fix that, and the deadline on it matters because of what happens if you do not.
The common errors are mechanical: a 945-A filled in with deposit dates rather than liability dates, a schedule that totals the deposits rather than the tax, a month-by-month schedule from a payer who was actually semiweekly, or a payroll system that printed the Form 941 schedule by mistake.
The averaged penalty, and why order matters
If no valid schedule is on file when the case reaches assessment, the IRS computes an averaged penalty: it takes the total tax, spreads it evenly across the deposit due dates in the year, and penalizes every deposit that was late against that invented pattern. For a payer whose withholding is lumpy (most backup withholding is, since it follows a few large payments or a B-Notice season), the averaged penalty is almost always higher than the true one, sometimes by a wide margin. The sequence to follow is therefore fixed: send the corrected Form 945-A first, with liability dates that add exactly to line 3, and get the penalty recomputed on the real pattern; a corrected schedule must be accepted and the penalty refigured even after assessment. Only then raise reasonable cause or ask for First Time Abate, because the IRS will not consider either against an averaged assessment. The averaged penalty page shows the arithmetic, the corrected 945-A cover letter is written for this reply, and the deposit penalty calculator computes the real penalty from your own dates so you know what the recomputation should produce.
Questions about CP 207 / CP 207L
Who receives CP 207 / CP 207L?
Payer. Issued on Forms 941, 943, 944, 945 and 1042 when the liability schedule is incomplete, illegible, negative, or does not add to the tax on the return.
What is the deadline on CP 207 / CP 207L?
45 days to supply a corrected Form 945-A; assessment at week 15.
What should I do when CP 207 / CP 207L arrives?
Send a corrected 945-A with liability dates (not deposit dates) that total line 3; a corrected schedule received even after assessment must be considered and the penalty recomputed (IRM 20.1.4.18.2). Then, and only then, argue reasonable cause or First Time Abate.
Is CP 207 / CP 207L about my own income tax?
No. This decoder covers information reporting and withholding: the notices a payer, filer or payee sees because of Forms 1099, W-2, 945 and the TINs on them. Individual income-tax notices follow a different track.
Have a different notice? The IRS notice decoder lists all 77 in the order they tend to arrive.