Letter 2782-C: IRC 6656(e) deposit designation request received too late

What Letter 2782-C is

Tells a taxpayer that its request to designate how deposits are applied cannot be considered because it was not received within 90 days of the 23C date of the notice that assessed the failure-to-deposit penalty (IRM 20.1.4.26.3(3)). The statute does not allow a late request to be honored.

The deadline

None; the request is closed.

What to do

The designation route is closed for that notice, but reasonable cause (deposit by deposit, with dates) and bank-error abatement on Form 13287 are not time-limited the same way. If a later notice re-assesses or adjusts the penalty, a new 90-day window opens from its 23C date.

The 90-day window and why it is firm

IRC 6656(e) gives a depositor the right to tell the IRS how a deposit should be applied among the liabilities in a period, instead of accepting the default most-recent-first application that produces cascading penalties. The right is conditioned on timing: the designation must be made within 90 days of the date of the penalty notice. That condition is in the statute, not in IRS procedure, and so the IRS has no discretion to accept a late one however good the reason. Letter 2782-C is the letter that says so. It does not reject the substance of your designation and does not decide anything about the penalty; it records that the request arrived after the window closed and will not be considered.

The 90 days run from the notice that assessed the penalty, which is usually a CP210 or CP220 showing the penalty on the account, not from the CP 568 computation that may have arrived later. A payer who waited for the computation before designating has often run out the clock.

What is still open

Everything except designation. A reasonable-cause request addressed deposit by deposit (what happened on each date, why, and what was done about it) has no 90-day limit and is decided by the campus on the facts. First Time Abate applies to failure-to-deposit penalties for a payer with a clean compliance history for the prior three years and is granted on request, by phone or letter, without a reasonable-cause showing. Bank error, where the deposit was initiated on time and the financial institution failed to transmit it, is handled on Form 13287 with a letter from the bank, and the bank-error abatement kit covers that. And if the penalty is later adjusted or re-assessed for any reason (a corrected Form 945-A is accepted, a credit is transferred in), the adjustment notice carries its own date, and a new 90-day window opens from it; the designation request template can be sent again then. The deposit penalty calculator shows how much the designation would have saved, which is useful for deciding whether to pursue the other routes.

Questions about Letter 2782-C

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