IRS Notice 972CG: Proposed Penalty for Late or Incorrect 1099s and W-2s — How to Respond

What Is Notice 972CG?

Notice 972CG is the IRS's Notice of Proposed Civil Penalty for information returns. Businesses, landlords and other payers get it when the IRS believes forms such as 1099-NEC, 1099-MISC or W-2 were filed late, filed with errors (for example a wrong or missing taxpayer identification number), not filed, or not furnished to the payee.

The penalty comes from two parts of the tax code: IRC 6721 for returns filed with the IRS, and IRC 6722 for copies you must give to the people you paid. The IRS explains the process in IRM 20.1.7.

The word that matters is "proposed". The penalty has not been charged yet. The notice lists each form the IRS found a problem with and gives you a window to agree, or to explain why the penalty should not apply. This guide is current as of November 11, 2026.

Your Deadline: 45 Days (60 for Foreign Filers)

The IRS information return penalties page (updated October 30, 2026) says to respond within 45 days, or within 60 days if you are a foreign filer. Count from the date printed on the notice, not from the day it reached you.

Follow the reply instructions on the notice itself. They say where to send your answer and what to sign. Keep a copy of everything you send and a record of the date you sent it.

If you need more time to gather records, call the number on the notice before the reply date. Do not let the window pass in silence: after it closes, the IRS assesses the penalty and sends a bill.

How Much the Penalty Can Be

The penalty is charged per form, and the amount depends on how late the correct form was filed. For returns due in 2026, the IRS lists: $60 per return if filed up to 30 days late; $130 if filed 31 days late through August 1; and $340 if filed after August 1 or not filed at all.

For returns due in 2027, the amounts are the same per-return figures: $60, $130 and $340. If the IRS finds intentional disregard of the rules, the penalty is $680 per return for returns due in 2026 and $690 for returns due in 2027, with no yearly maximum.

The other amounts have yearly maximums, with lower ones for small businesses. The IRS page lists the exact limits for each year. Because the penalty applies to each form, a few dozen late 1099s can add up quickly.

To see an estimate for your own forms, use our free information return penalty calculator. Treat the result as an estimate: the notice shows the IRS's own figures.

Step 1: Check Every Form on the Notice

Start by checking the IRS's facts. For each form the notice lists, find the date you filed it, any filing acknowledgement you received, the payee's name and taxpayer identification number (TIN), and whether you later filed a correction.

If a form was filed on time and correctly, or the notice lists a form you did not have to file, say so in your reply and send proof. Mistakes do happen, and showing the record is often the quickest way to remove part of a proposed penalty.

The tax code also has special rules for some small errors and quick corrections (IRC 6721). If you think one of them fits your forms, mention it in your reply and ask the IRS to apply it.

Step 2: Explain Reasonable Cause

Under IRC 6724, the IRS can waive the penalty if the failure was due to reasonable cause and not willful neglect. In general you need to show two things: something outside your control, or a significant mitigating factor, caused the problem; and you acted responsibly, both before it happened and after, for example by filing or correcting the forms as soon as you could.

Write a short, factual statement for each problem: what happened, when, why it stopped you from filing correctly, and what you did to fix it. Attach records that back it up. Keep to the facts and avoid guesses about the IRS's process.

Our free reasonable cause letter template gives you a structure you can adapt for a business and for the forms on your notice. Follow the notice's instructions for signing and sending your reply.

Why First-Time Abatement and Automatic Relief Do Not Apply

Many people expect First-Time Abatement to remove any first penalty. The IRS administrative waiver page lists the penalties it covers: failure to file, failure to pay, failure to deposit, and the late-filing penalties for partnership and S corporation returns. Information-return penalties are not on the list.

The IRS's new automatic penalty relief (AEP, IR-2026-83) does not cover IRC 6721 or 6722 either. See our guide to automatic penalty relief for what it does cover.

That leaves two main paths for a 972CG: show that the IRS's records are wrong, or show reasonable cause. If the penalty stands, you can pay it or ask about a payment plan.

After You Reply

If the IRS accepts your explanation, it removes or reduces the proposed penalty for the forms involved. If it does not, the penalty is assessed and you get a bill. Later IRS letters explain your options, including how to ask for an appeal.

If you agree with the penalty, you can sign the response as the notice asks and pay. Interest is added on any assessed amount you do not pay by the date on the bill.

To avoid the same notice next year, keep a calendar of the filing and furnishing due dates for each form you issue, ask payees for their TIN before you pay them, and keep proof of filing. The IRS notice library on this site has plain-English pages for other notices you may get.