IRS CP267: reconcile a business tax payment mismatch before using the credit

A CP267 notice says the credits claimed on a return differ from the federal tax deposits or estimated payments applied to the tax period, creating an overpayment on the account. Before adding that amount to the cash forecast, compare the notice with the return and the company's payment records. The apparent excess may belong to another obligation.

Give the preparer the complete notice and put its response date on the calendar. The IRS's CP267 guidance asks taxpayers who disagree to contact it within 30 days of the notice date about payment allocation. Follow the instructions on the notice you received and seek advice promptly if a date has already passed or another notice is also outstanding.

Create a working schedule listing each payment or credit shown on the notice beside the amount claimed on the filed return. Add the payment date, intended tax period, tax type, account, and confirmation reference from your own records. Keep bank debits, prior-year credits, and other adjustments distinguishable so the reviewer can see what kind of evidence supports each line.

Use the actual filed return, not an earlier draft. Ask the preparer to explain credits carried forward or applied from another period. Check whether a payment made after the accounting year-end was intended for the return under review. A cash-book report filtered to the financial year can omit a relevant payment even though the bank reconciliation itself is correct.

Mark the difference against each item rather than using one unexplained balancing amount. That makes it possible to distinguish a missing claim, an unexpected payment, a wrong-period application, or another adjustment without deciding prematurely that the IRS or the preparer made the same kind of error on every line.

Locate the payment confirmation and the bank evidence showing whether money actually left the account. Compare the selected tax and period with the instructions approved by the company. If a provider made the payment, request the underlying reference and allocation details instead of relying only on its invoice or funding debit.

Ask the adviser to obtain or inspect the relevant tax-account history through an authorized process when more information is needed. Record whether an amount remains on the account, was moved, was refunded, or is still unexplained. The company should not assume a credit can be transferred or spent until the professional has assessed the agency record and the appropriate next step.

Keep payment evidence under the correct legal entity. Related companies and owner tax payments should not be combined because they use the same finance team or bank contact. If the evidence points to a different taxpayer, flag that clearly for the adviser rather than relabeling the ledger entry to force the amounts to match.

Give the authorized responder a concise schedule explaining which entries agree and which need investigation, together with the notice, filed return, and relevant proof of payment. The IRS's CP267 guidance directs taxpayers disputing the application to contact the number on the notice or send copies of the notice and payment evidence to its stated address.

Retain the response, submission evidence, and notes of any agency conversation. Record the requested action and follow-up date. Ask the adviser whether other payment or filing action is required while the review continues; sending a reconciliation should not be treated as confirmation that every related obligation or deadline has been suspended.

If the overpayment appears to belong to another tax period, review that period's account too. A credit in one place may coexist with a balance due elsewhere. Give the adviser any related notices so the allocation can be assessed as one connected issue rather than two independent cases with different explanations.

The IRS's CP161 guidance tells business taxpayers to compare the notice with the return and check which payments were applied. Follow the instructions and dates for each notice separately. Do not assume the existence of a CP267 credit automatically resolves a CP161 balance or that the agency has already linked the two periods.

Once the adviser confirms the resolution, reconcile the final tax-account position with the payment register and ledger. Document any allocation change, refund, remaining credit, interest, or penalty. Keep the original payment and the correction connected so a later reviewer can distinguish the movement of an existing credit from a new cash payment.

Update the preparer's retained records and the company's cash forecast using the confirmed outcome. Keep an unresolved refund or transfer on the follow-up list until the corresponding evidence arrives. Before the next payment, have a second reviewer compare the selected taxpayer, tax type, period, and amount with the approved instruction to prevent the same allocation error recurring.