Federal

IRS Sending Erroneous CP161 Notices for 2024 Form 1041 Filings

Through member reports and professional discussions, NATP has been alerted that the IRS is erroneously issuing CP161 notices (balance due for underpayment of estimated tax) for certain 2024 Form 1041 trust returns.

The affected cases can involve:

• Trusts that elected to be treated as estates with tax years ending less than two years from the date of death, or
• Trusts that reported no tax liability on a prior year return and therefore were not required to make estimated payments.

Despite estimated payments not being required in these scenarios, taxpayers received notices asserting penalties under IRC §6654.

NATP response and IRS update

NATP raised this issue with our IRS stakeholder. The IRS confirmed:

• A programming change in early 2025 caused the erroneous penalty assessments
• The business operating division and IT are currently working to correct the issue
• Impacted accounts will be automatically adjusted within approximately one month

Additionally, the IRS has posted an internal alert, enabling assistors to identify the issue and help with corrections if taxpayers call.

We recommend that members inform affected clients that the IRS is aware of the issue and is taking steps to resolve it. No further action should be necessary at this time unless penalties are not reversed within the expected timeframe.