What Are CP210 and CP220 Notices?
CP210 and CP220 are adjustment notices sent by the Internal Revenue Service to business entities informing them that the IRS made one or more changes to the business's federal tax account. The adjustment may result in an additional amount owed, a credit applied to the account, a penalty assessment, or some combination of these. The notices confirm that a change has been made — not proposed — and provide the detail behind what changed and why.
CP210 typically relates to employment tax accounts — adjustments to payroll tax filings, Form 941 quarterly returns, Form 944 annual returns, or other employment-related tax periods. It is most commonly issued when the IRS identifies a discrepancy between what a business reported on an employment tax return and what it actually deposited during the period.
CP220 typically relates to business income tax accounts — adjustments to corporate income tax (Form 1120), S-corporation returns (Form 1120-S), partnership returns (Form 1065), or other business income tax filings.
Both notices arrive on IRS letterhead addressed to the business entity at its registered address. They will identify the business name and Employer Identification Number (EIN), the specific tax period affected, a line-by-line explanation of each change made to the account, and the resulting balance or credit after those changes are applied.
Why Did a Business Receive CP210 or CP220?
The IRS's automated processing systems review filed business returns and match reported information against the IRS's own records — prior filings, information from other payers, deposit records from the Electronic Federal Tax Payment System (EFTPS), and data from information returns. When a discrepancy is identified, the system makes an adjustment and issues the notification.
Payment misapplication. This is among the most frequent causes of CP220 notices. A business makes a quarterly estimated payment, but the payment is credited to the wrong tax period or the wrong EIN — sometimes due to the business entering the wrong period on the payment, sometimes due to an IRS processing error. The CP220 reflects the account as it appears in IRS records, which may show an underpayment for the correct period and an overpayment credit sitting unapplied in an incorrect period.
Failure-to-deposit (FTD) penalty on employment taxes. For employment tax accounts, businesses are required to deposit withheld payroll taxes on a specific schedule — either semi-weekly or monthly depending on the business's total annual payroll tax liability. A deposit made even one day late, or a deposit made for the wrong amount, triggers an FTD penalty calculated as a percentage of the late or underpaid deposit amount. The FTD penalty schedule is tiered: 2% for deposits 1 to 5 days late, 5% for deposits 6 to 15 days late, 10% for deposits more than 15 days late, and 15% for amounts not deposited by the IRS notice date following a levy. These penalties are assessed automatically and are reflected in a CP210 notice.
Failure-to-file or failure-to-pay penalties. If a required business return was filed late or the associated tax was not paid by the due date, these penalties are assessed and reflected in the adjustment notice.
Interest assessment. When a balance has existed on the business's account for a prior period, accumulated interest may be formalized through an adjustment notice.
Return processing correction. The IRS found a math error or data entry error when processing the business's return — either an error the business made or a prior IRS processing error — and corrected it.
Credit adjustment in the business's favor. The IRS identified an overpayment — from an excessive deposit, a prior period credit, an estimated payment that exceeded the liability, or a correction of a prior error — and applied it as a credit to the account. This type of adjustment may or may not require action depending on whether a balance remains after the credit is applied.
Amended return processing. When a business files an amended return (Form 1120-X, an amended Form 941, or similar), the IRS processes the changes and issues a CP210 or CP220 reflecting the resulting adjustments to the account.
What Is Physically on the CP210 or CP220?
The notice is structured to show the complete accounting of what changed:
Business identification. The entity name and EIN confirming the correct business.
Tax period. The specific quarter (for employment taxes) or fiscal or calendar year (for income taxes) that was adjusted. A single CP210 or CP220 addresses one tax period — multiple notices may be issued if multiple periods were adjusted simultaneously.
A description of each adjustment. For each change made, the notice will provide a description of what was adjusted and why. For penalty assessments, the description will identify the penalty type and the basis for the assessment. For payment misapplications, it will describe where the payment was moved from and where it was credited. This section requires careful reading — the entries may be in IRS code language, but each line corresponds to a specific transaction on the account.
The account balance after adjustments. The total amount the business owes or is credited after all changes are applied. If this is a positive number, it is owed. If it is a negative number, it is a credit.
Payment instructions and deadline. If a balance is owed, the notice will specify how to pay and identify a date — typically 21 days from the notice date — after which additional interest begins accruing on the unpaid balance.
Dispute instructions. If the business disagrees with any of the adjustments, the notice will provide the deadline (typically 60 days from the notice date) and the process for submitting a written dispute.
Employment Tax Adjustments — Why CP210 Requires Immediate Attention
When a CP210 relates to employment taxes — payroll tax deposits, Form 941 balances, or FTD penalties — the stakes are meaningfully higher than for income tax adjustments, for two distinct reasons.
The penalty structure is steep and fast. FTD penalties are percentage-based and begin accruing immediately upon a missed or late deposit. A business with a $50,000 payroll tax deposit obligation that deposits one day late faces a $1,000 penalty (2%). If the same deposit is 16 or more days late, the penalty grows to $5,000 (10%). For a business with weekly payroll, these penalties can accumulate across multiple pay periods before the CP210 is received, resulting in a notice that reflects penalties across several deposit dates simultaneously.
Trust Fund Recovery Penalty risk. Employment tax deposits include the "trust fund" component — the federal income tax withheld from employees' paychecks plus the employees' share of Social Security and Medicare taxes. This money belongs to the federal government the moment it is withheld. When a business fails to remit it, the IRS can assess the Trust Fund Recovery Penalty (TFRP) against any individual who qualifies as a "responsible person" — someone who had control over the business's finances and willfully failed to remit the trust fund taxes.
A CP210 that reflects ongoing deposit failures or a significant employment tax balance is an early warning sign that the TFRP risk is growing. The IRS does not automatically assess the TFRP when it issues a CP210 — the TFRP process involves a separate investigation, interviews with responsible individuals, and individual assessments. But the existence of an unresolved employment tax balance on a CP210 puts the business on a path toward that process.
What Happens If CP210 or CP220 Is Ignored?
The collection sequence for a business with an unresolved adjustment balance follows a similar pattern to the standard IRS collection sequence, but business accounts with employment tax issues can escalate faster.
For income tax adjustments on CP220: the business will receive additional balance-due notices, eventually progressing to levy notices. The IRS can file a Notice of Federal Tax Lien, levy business bank accounts and receivables, and assign a Revenue Officer for significant balances.
For employment tax issues on CP210: the IRS treats unremitted payroll taxes with higher urgency. Revenue Officer assignment can happen at lower balance thresholds. The TFRP investigation may begin alongside — or shortly after — the standard collection sequence. Once the TFRP is assessed against individuals, the collection effort expands to include those individuals' personal assets.
How to Verify Whether the Adjustment Is Correct
Before paying or disputing the CP210 or CP220, verify the adjustment against the business's own records.
For payment misapplication adjustments: Pull EFTPS payment history and confirm the dates, amounts, and periods of each deposit. Compare to what the IRS shows as credited on the adjustment notice. If a payment was misapplied, the EFTPS records showing the original payment reference will be the documentation needed to have it corrected.
For FTD penalty assessments: Compare the deposit dates shown on the CP210 to the actual deposit dates in EFTPS. Verify the IRS used the correct deposit schedule (semi-weekly vs. monthly) based on the business's lookback period. Verify the penalty percentages applied correspond to the actual number of days late.
For income tax adjustments on CP220: Compare the IRS's figures to the business's filed return and any supporting schedules. Confirm any amended return the business filed is reflected correctly.
For credit adjustments: Verify the credit was applied to the correct tax period and that the amount matches what the business expected.
Who Receives CP210 and CP220 Most Often?
Businesses that handle payroll internally without dedicated payroll software. The semi-weekly and monthly deposit schedule requirements are complex, and deposit deadline errors are common among businesses that calculate and submit payroll tax deposits manually. Even experienced bookkeepers miss deposit deadlines when cash flow is constrained.
Businesses that switched payroll providers mid-year. When a business transitions from one payroll service to another, deposit reference numbers, EINs, and tax period designations can get mis-entered during the transition, leading to misapplied payments and CP210 notices.
C-corporations with estimated tax obligations. Corporate estimated tax payments made in the wrong amount or credited to the wrong period generate CP220 notices. New corporations that underestimate their first year's tax liability are particularly common CP220 recipients.
Businesses that filed amended employment tax returns. Filing a Form 941-X to correct a prior quarter's payroll tax return generates a CP210 reflecting the adjustments from the amendment.
Related IRS Notices
- CP161 — Business Tax Balance Due — the formal balance-due notice that may accompany or follow a CP220 adjustment
- CP162 — Late Filing Penalty for Partnership/S-Corp — a related penalty notice for pass-through entities
- Letter 725-B — Revenue Officer Meeting Request — what escalation looks like for business accounts with significant employment tax issues
Frequently Asked Questions
What if I believe the adjustment on CP210 or CP220 is wrong?
You have 60 days from the notice date to dispute the adjustment in writing. The dispute must be submitted to the address shown on the notice — not the general IRS address — and should include your business EIN, the specific tax period in question, a clear explanation of why each disputed adjustment is incorrect, and documentation supporting your position. Send via certified mail with return receipt.
Can the FTD penalty on a CP210 be abated?
Yes. FTD penalties on employment taxes can be abated through First-Time Penalty Abatement if the business has a clean compliance history for the prior three tax periods of the same type. They can also be abated for reasonable cause — circumstances beyond the business's control that prevented timely deposits. The IRS also offers a specific FTD penalty waiver for taxpayers who were in their first year of owing employment taxes and changed their deposit frequency as a result of the prior year's liability.
What is the difference between the employer and employee portions of employment taxes for CP210 purposes?
The total employment tax deposit includes both the employer's share of Social Security and Medicare taxes and the employee's share (withheld from paychecks) plus the withheld federal income tax. For FTD penalty assessment purposes, the total deposit is treated as one obligation. For Trust Fund Recovery Penalty purposes, only the "trust fund" portion — the employees' share of Social Security and Medicare plus withheld income tax — is considered. The employer's matching share is not a trust fund tax and cannot be assessed through the TFRP.
What if the CP220 shows a credit rather than a balance due?
Verify the credit is accurate and confirm which period it is applied to. If the credit should be applied to a different period or refunded, contact the IRS to request the correct disposition. The IRS will not automatically refund a business credit — you may need to request it specifically or confirm its application to an outstanding balance.
Does CP210 or CP220 trigger an audit?
No. These notices are generated by the IRS automated systems — not by a human examiner conducting an audit. An audit is a separate process involving a human reviewer. However, if a CP210 or CP220 reflects repeated compliance failures — multiple FTD penalties, consistent late filing — it may increase the probability of a future examination.
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If your business received a CP210 or CP220 and you want to understand how the adjustment affects your overall account situation, the FreshStartGuide eligibility tool can help.