CP 575 Course Day 20 Post

CP 575 Course Day 20 Post

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Day 20
IRS Compliance Checks – How To Avoid Mismatch Notices

Ensuring IRS compliance is one of the most important responsibilities for any LLC owner. Even when you’ve filed your elections correctly and received Notice CP 575, the IRS may still run automated compliance checks to verify that the entity type, tax form filed, and EIN details all match your records. When they do not match, the IRS issues “mismatch notices” that can delay processing, trigger penalties, or require corrections.

In this lesson, you’ll learn how the IRS performs compliance checks, the types of mismatch notices issued, and how LLC owners can avoid these issues by keeping their filings accurate and consistent.

Understanding IRS Compliance Checks

The IRS runs various automated checks on EINs and business tax filings. These checks verify:

1. Whether the entity type on record matches the tax form filed

2. Whether the EIN is active and correctly associated with the business

3. Whether elections (Forms 2553 and 8832) are filed and accepted

4. Consistency of ownership structure with submitted tax returns

5. Timely filing of election forms relative to the LLC’s tax period

If anything doesn’t align, the IRS flags the account and may issue a notice requesting clarification or correction.

Common IRS Mismatch Notices LLCs Receive

Some of the most frequent mismatch notices include:

• CP 2100 – Information return mismatch (name/EIN incorrect)

• CP 148A – EIN validation discrepancy

• CP 136 – Notice about incorrect tax form filed

• CP 259 – Non-filing notice for forms the IRS expects based on your entity type

• CP 575 Variations – IRS may issue updated EIN letters when changes occur

• CP 267 – Missing or incorrect return-related information

Each notice indicates that something in the IRS system does not match your LLC’s filing status, EIN, or tax election.

Why Mismatches Occur for LLCs

The mismatch issues usually occur due to:

1. Filing the wrong tax form (e.g., filing Form 1065 but IRS sees you as single-member)

2. Elections not yet processed or filed late

3. Incorrect or outdated records with the IRS

4. Incorrect EIN/name combinations on submitted forms

5. State-level entity changes not updated with the IRS

6. Filing as an S Corporation without an approved Form 2553

This is why reviewing your CP 575 and election acceptance letters before filing taxes is critical.

How to Avoid IRS Mismatch Notices

Small, simple steps can prevent months of IRS correspondence and delays:

1. Check entity type on Notice CP 575 each year before filing

2. Verify whether any election (1120 or 1120-S election) was filed and accepted

3. Keep copies of Forms 8832 and 2553 along with IRS acceptance letters

4. Ensure business name and EIN match IRS records exactly

5. Inform IRS about ownership changes using appropriate forms

6. File elections within their deadlines (avoid retroactive filings when possible)

7. Use consistent information across federal, state, and bank documents

When everything matches, IRS systems approve tax filings smoothly.

What to Do if You Receive a Mismatch Notice

If your LLC receives one of these notices:

• Read the IRS notice carefully (each provides specific instructions)

• Compare the notice with your CP 575 and election letters

• Correct any errors immediately

• Respond within the specified timeframe

• Provide supporting documentation (CP 575, election approvals, etc.)

If you filed the wrong tax form, amend immediately using Form 1040X, 1120X, or corrected 1065
Consult a tax professional if unsure

Quick action helps prevent penalties and processing delays.

Conclusion

IRS mismatch checks exist to ensure that businesses file taxes correctly according to their recorded entity type. Using Notice CP 575, election acceptance letters, and consistent entity information helps LLCs avoid mismatch notices and maintain compliance with minimal stress.

With this lesson, Module 4 (Elections and Compliance) concludes. In the next module, we move into applying everything learned through real-world examples, step-by-step filing walkthroughs, and advanced topics to empower your LLC tax journey.

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