Letter 313-C: Proposed failure-to-deposit penalty: liability schedule needed

What Letter 313-C is

The manual counterpart of CP 207, sent by a tax examiner when the record of federal tax liability (Form 945-A, or the schedule on the return) is missing, incomplete or does not agree with the tax, proposing an averaged penalty. Encloses two blank schedules and gives 45 days; an unacceptable reply draws a 20-day warning before assessment (IRM 20.1.4.16, 20.1.4.16.1).

The deadline

45 days to return a valid schedule; 20 days after a warning.

What to do

Complete the schedule with liability dates (the dates you withheld), not deposit dates, totaling the tax on the return. Until a valid schedule is on file reasonable cause cannot be considered (IRM 20.1.4.26.1(2)).

The examiner's version of CP 207

Letter 313-C does the same job as CP 207, but it is sent by a tax examiner working the case rather than generated by the system. It usually means a person has already looked at the return, found the record of federal tax liability missing or inconsistent with the tax, and computed what the penalty would be on an averaged basis. The letter encloses two blank schedules, proposes the averaged amount, and gives 45 days. A reply that does not fix the problem (another schedule that does not add to the tax, deposit dates instead of liability dates, a letter arguing reasonable cause without a schedule) draws a 20-day warning, and then the proposed penalty is assessed. Because an examiner is on the case, a clear reply is often resolved faster than a CP 207 would be.

Getting the schedule right the first time

A Form 945-A has one job: to show, for each day of the year on which you withheld, how much you withheld. The dates are the dates of the payments from which tax was taken, not the dates you deposited. The sum of the daily entries must equal line 3 of the Form 945 exactly; a schedule that is off by a dollar is rejected. A monthly depositor does not file a 945-A at all and should instead complete the monthly liability line on the return itself; a payer who became semiweekly mid-year, or who crossed $100,000 on a single day, files the 945-A for the whole year. Attach a short cover letter saying that the enclosed schedule replaces the one on file and asking that the penalty be recomputed from it before any other question is considered; the corrected 945-A cover letter does that. Until a valid schedule is accepted the IRS will not consider reasonable cause or First Time Abate, so hold those arguments for the recomputed penalty. The averaged penalty page explains what the proposed figure is built from.

Questions about Letter 313-C

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