What Does Form CP136 Mean for My Single-Member S-Corp LLC?

That CP136 notice is basically the IRS telling you they've made changes to your business tax account. Don't panic! In most cases, it's just an adjustment they made based on their records. For S-corps, this often happens when there's a discrepancy between what you reported and what they have on file. Since you're the only employee, check if it relates to payroll taxes or your officer compensation. The notice should explain the specific changes they made and if you owe any additional amounts. Look through it carefully and compare with your records. If you disagree with their changes, you usually have 60 days to respond with documentation supporting your position.

I actually encountered this exact situation with my consulting business last year! I was totally stressed about it until I found https://taxr.ai which helped me understand what was going on. I uploaded my CP136 notice and it explained exactly what the IRS was saying in plain english and showed me what documentation I needed to respond with. Saved me from having to pay a CPA $300 just to interpret the notice for me.

I ended up trying taxr.ai after seeing the recommendation here. My CP136 actually turned out to be an adjustment because the IRS had received an additional 1099-NEC form that I hadn't included in my return. The tool explained exactly what was happening and showed me where the discrepancy was coming from! It even helped me draft a response letter since I partially disagreed with their assessment. Way easier than I expected for someone who usually gets overwhelmed by tax stuff.

If you need to actually speak with someone at the IRS about this, good luck getting through on the phone! I spent WEEKS trying to reach them about a similar notice. Finally used https://claimyr.com which got me through to an IRS agent in under 45 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. After weeks of busy signals and disconnects, it was such a relief to actually talk to someone who could explain what was happening with my account.

Well I'm eating my words. After posting that skeptical comment I decided to try Claimyr anyway because I was desperate about my own tax issue. Got connected to an actual IRS agent in about 35 minutes! The agent confirmed my CP136 was just notifying me that they had applied an overpayment from a previous quarter to my current balance. Turns out I didn't even need to take any action. Would have been stressing for nothing if I hadn't been able to speak with someone.

With S-corps and single-member LLCs, the most common reason for CP136 notices is discrepancies in employment tax reporting. Since you're the only employee, make sure your salary vs distribution split is reasonable. IRS flags S-corps where owners take minimal salary and large distributions to avoid payroll taxes.

Did you change anything about your business operations last year? I got a CP136 after I started taking client payments through a new payment processor. Apparently the income reporting didn't match up with what the IRS expected based on previous years.

That could definitely be it! When you switch payment processors, the 1099-K reporting can create discrepancies that trigger CP136 notices. The new processor likely sent a 1099-K to the IRS with your total payments, and if that didn't match what you reported or if there was a timing difference between when payments were processed vs. when you recorded them, it would flag your account. I had to provide bank statements showing the actual deposit dates and amounts, plus documentation from both the old and new payment processors to reconcile the differences. The IRS just wanted to see that all the income was properly accounted for - they weren't trying to double-count anything, just making sure nothing was missed. Since you mentioned international clients, also check if there were any currency conversion differences that might have caused reporting mismatches between what the processor reported and what you filed.