What CP 260 is
"A CP 260, We removed a payment Erroneously Applied to Your Account- Balance Due, notifies the taxpayer of a credit reversal (e.g., erroneous payment posted and taken out, other credits allowed and then removed) or an adjustment to their account" (IRM 21.3.1.7.39, Oct. 1, 2026). It generates automatically when a credit transfer leaves the giving module with a debit balance above a redacted amount (IRM 21.5.8.4.4, Mar. 14, 2024). For a payer the usual story is that a Form 945 deposit posted to the 941 module, was moved to the 945 module at the payer's request, and the 941 module had a real liability the stray deposit had been covering.
The deadline
The balance shown is due on the notice-and-demand terms: 21 calendar days to pay without additional interest. Penalties on the newly exposed balance run from the original due dates.
What to do
Confirm the reversal is the transfer you requested, then look at the module it came from: if that module now shows a true balance, pay it; if the module should have had its own deposit that is also missing, trace that payment. If the reversal was not something you asked for, the script is "Research account and make appropriate credit transfer(s)" (IRM 21.3.1.7.39), with your proof of payment.
Questions about CP 260
Who receives CP 260?
Business taxpayers from whose module a credit was moved, including the 941 module that had absorbed a stray Form 945 deposit. "A CP 260, We removed a payment Erroneously Applied to Your Account- Balance Due, notifies the taxpayer of a credit reversal (e.g., erroneous payment posted and taken out, other credits allowed and then removed) or an…
What is the deadline on CP 260?
The balance shown is due on the notice-and-demand terms: 21 calendar days to pay without additional interest. Penalties on the newly exposed balance run from the original due dates.
What should I do when CP 260 arrives?
Confirm the reversal is the transfer you requested, then look at the module it came from: if that module now shows a true balance, pay it; if the module should have had its own deposit that is also missing, trace that payment. If the reversal was not something you asked for, the script is "Research account and make appropriate credit transfer(s)" (IRM 21.3.1.7.39), with your proof of payment.
Is CP 260 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 89 in the order they tend to arrive.