CP 267 / CP 268: Notice of excess credit: more deposits posted than the return claimed; Q- freeze

What CP 267 / CP 268 is

"When a module has more credits than claimed by the taxpayer, a Q- freeze is established and a CP 267, No Math Error - Credit Offset Notice, or a CP 268, Math Error Credit Offset Notice, is generated. These notices list up to 39 credits and request that the taxpayer explain if the credits are to be applied to other accounts or refunded" (IRM 21.7.11.4.9(1), Jan. 9, 2026). On Form 945 it means backup-withholding deposits on the year exceed the tax on the return. The credit "is frozen from refunding or offsetting for 15 cycles from the posting of the TC 150" (IRM 3.14.2.6.8(1), Jan. 1, 2026); on Form 945 the computer will not roll an additional credit elect forward after the posting cycle, so an unclaimed overpayment sits until someone moves it (IRM 3.14.2.6.1.5.1(2)).

The deadline

15 cycles from the return posting. "If less than three weeks remain before the freeze expires, do not input any credit transfers" (IRM 21.7.11.4.9(5)); a requested refund takes 3 to 4 weeks (IRM 21.7.11.4.9(6)).

What to do

Reconcile the listed credits to your EFTPS confirmations. If a deposit belongs to another year or form, ask for a credit transfer while three or more weeks remain. If the return under-reported tax, say you will file a Form 945-X; the assistor holds the overpayment (IRM 21.7.11.4.9(6)). If a payment is not yours, say so; an unplaceable credit under one year old goes to the Unidentified Remittance File and at one year or older to the Excess Collection File (IRM 21.7.11.4.9(7)). Keep the address of record current: an undeliverable CP 267 is re-mailed but the manual says "Do not release the Q- freeze" (IRM 21.7.11.4.9.1).

How a Form 945 ends up overpaid

Form 945 is an annual return deposited against through the year, so the deposits and the return are prepared at different times by different processes, and they drift apart. The common causes of an overpaid 945 account are a deposit tagged to Form 945 that belonged to Form 941 or to another year (the mirror image of a CP 108), backup withholding that was deposited and then refunded to the payee when a W-9 arrived, but still shows as deposited, a 1099 batch that was corrected downward after the deposits were made, and a payroll provider's deposit landing on the client's account twice. When the return posts showing less tax than the deposits on the account, the IRS freezes the difference rather than refunding it automatically, because it does not know whether the return or the deposits are right, and sends CP 267 (or CP 268 if the return also contained a math error) listing the credits and asking what you want done with them.

Answering before the freeze lifts

The freeze lasts about fifteen weeks from the return's posting, after which the credit is released on the IRS's own terms, and the manual tells assistors not to start a credit transfer in the last three weeks of the window. So reconcile the listed credits to your EFTPS confirmations promptly and reply with one of four answers. If a deposit belongs to another form or year, ask for a credit transfer to that account, giving the EIN, form and period; the transfer carries the original payment date. If the return understated the tax, say that a Form 945-X is coming and ask that the credit be held for it. If the overpayment is real, say whether you want it refunded or applied to the next year's Form 945; a refund takes three to four weeks. If a listed payment is not yours, say so, because an unclaimed credit eventually moves to the IRS's unidentified and excess collection files, from which recovering it is slow. Keep the address of record current while the case is open; an undelivered CP 267 does not release the freeze. The Form 945 page covers the account mechanics and the Form 945-X page covers correcting the return.

Questions about CP 267 / CP 268

Have a different notice? The IRS notice decoder lists all 77 in the order they tend to arrive.