IRS CP59 Notice: What to Expect, How to Respond

Receiving a notice from the Internal Revenue Service (IRS) can be a cause for concern, especially if you’re not sure what the notice means or why you’re receiving it.

A CP59 Notice holds particular significance as it alerts taxpayers of their failure to file a tax return. Understanding your CP59 Notice is essential for ensuring compliance with IRS requirements and addressing any potential issues with your tax returns promptly. Here’s what you need to know if you receive this notice.

What is the IRS CP59 Notice?

This IRS notice is sent to taxpayers who have failed to file a personal tax return. It serves as a formal notification that the IRS is aware of your missing income tax return for the indicated year(s), and it reiterates the importance of addressing the issue promptly.

A CP59 Notice asks taxpayers to either file their tax return immediately or otherwise explain to the IRS why they believe they don’t have to file, which can be done through Form 15103, Form 1040 Return Delinquency.

2024: The IRS is Targeting High-Income Non-Filers

As of February 2024, the IRS is officially targeting high-income non-filers in a bid to crack down on non-compliance. The IRS has estimated that there have been over 125,000 instances of non-filing by high-income earners since 2017. This means that the IRS will be issuing CP59 notices to many who have failed to file their tax returns.

But whether you’re a high-income earner or not, the best time to address your tax compliance issues is always now. The sooner you can get the wheels in motion, the quicker your issues can be resolved, and importantly, the less risk you’re taking when it comes to penalties, interest, and possibly collections.

If you have failed to file one or more tax returns, consider speaking to a trusted tax professional today to help get your situation resolved quickly.

What are the Penalties Associated with IRS CP59 Notice?

Failing to file a tax return can leave you open to the IRS’s Failure-to-File penalty. This penalty is typically assessed as 5% of the unpaid taxes owed for each month or part of a month that the return is late, up to 25%. Additionally, interest also accrues on any unpaid and overdue taxes.

If you owe taxes to the IRS for a tax year you have yet to file for, you may also face a Failure-to-Pay penalty. However, if both penalties are applied in the same month, they are combined for a total penalty of 5% for each month or part of a month that your return was late. Once the Failure-to-File penalty maxes out at 25%, the Failure-to-Pay penalty will continue to apply until it reaches its maximum level of 25%.

Depending on your circumstances, it might also be possible for taxpayers to have penalties reduced, removed, or disputed. Penalties may be reduced or removed if you can show reasonable cause for your failure to meet tax obligations or if you’re normally compliant with the rules and this is your first time filing late.

Penalties can also be disputed if you disagree with the amount the IRS says you owe them.

No matter the situation, it’s important for taxpayers who receive IRS Notice CP59 to take immediate action and file their tax return for the indicated year to avoid further penalties and interest charges.

What is Form 15103?

If you have failed to file a tax return, the IRS may send you Form 15103 along with a CP59 Notice. Form 15103 (Form 1040 Return Delinquency) is a form that can help you file a correct return and solve your tax compliance issues quickly. Alternatively, if you believe you don’t have to file, you can use this form to make your case.

The exact instructions for completing Form 15103 will vary depending on your situation and what the IRS is asking of you. If you receive this document and you’ve filed your return within the last eight weeks, then you can safely disregard it or check with the IRS to see if they have received your return. If you’ve filed longer than eight weeks prior to receiving Form 15103, then you can follow the instructions to attach a copy of your return and send both of them back to the address provided.

In other cases, it may be the case that the taxpayer addressed is deceased, or you may be exempt from having to file taxes for the year in question. In either case, the form provides instructions on how to complete and send it off correctly.

Once complete, you can mail Form 15103 to the address provided on the envelope in which you received the letter or fax the form to the number provided on the notice.

What is a Substitute-for-Return?

A Substitute for Return (SFR) is a tax return prepared by the IRS on behalf of a taxpayer who has failed to file their own tax return. The IRS typically creates an SFR when they receive information from third-party sources indicating that a taxpayer has income but has not filed a tax return for a particular year. This information is usually based on sources like W-2 forms from employers, or 1099 forms from clients, banks, investment firms, payment processors, and other sources.

Because the IRS uses whatever information is available to them to estimate the taxpayer’s income, it can sometimes lead to an inaccurate tax return and an overestimated tax liability. Importantly, an SFR does not take into account any potential deductions or credits the taxpayer may be eligible for, which can also contribute to a higher tax liability compared to if the taxpayer had filed their own return. For these reasons, it’s almost always a good idea to file a correct tax return if you receive an SFR.

An SFR is usually created at least one year after the due date for filing your return has passed, but the exact timing can vary depending on the circumstances.

Once the IRS files an SFR for a taxpayer, they will send a notice to the taxpayer informing them of the SFR and the tax amount owed based on their calculations. Taxpayers who receive an SFR notice have the opportunity to challenge this assessment by filing their own tax return. If you receive an SFR notice, review it carefully and file your own return if you disagree with the IRS’s assessment.

What is a Notice of Deficiency CP3219N?

This notice is one that is sent to taxpayers, informing them that the IRS has generated an SFR on your account. It states that because the IRS hasn’t received your tax return, they have calculated your tax, penalty, and interest based on information from other sources. This notice is also known as the 90-day letter.

If you have received this notice, you will have 90 days to file a petition in the United States Tax Court to dispute the IRS’ proposed return for you.

If you don’t respond to this letter, the IRS will assess the tax against you and have the right to initiate collection actions against you after 90 days.

IRS CP59 Notice – FAQ

What happens if you ignore a CP59 notice?

A CP59 Notice alerts you to the fact that the IRS has not received a tax return for a specific tax year. Ignoring it can have a serious effect on your finances. If you don’t respond to the IRS, they are likely to eventually generate a Substitute for Return (SFR) on your behalf, which can often lead to a higher tax liability compared to filing yourself.

Failure to address your tax compliance issues promptly may result in the imposition of penalties and interest charges by the IRS. To avoid further complications, it’s crucial to respond to IRS Notice CP59 promptly by filing the required tax return for the indicated year.

Alternatively, if you believe you don’t have to file taxes for the year(s) in question, you can complete Form 15103 and provide your reasoning to the IRS.

What are the options if I can’t pay back taxes?

It isn’t a crime if you’re struggling to afford to pay back taxes. In fact, the IRS has several options for those who can’t pay their tax liability in full, and you may be eligible for one or more of them depending on your situation:

  • IRS Installment Plan – This agreement allows you to pay your tax debt in monthly installments over time. The IRS offers various types of installment agreements, including streamlined and guaranteed agreements, depending on the amount owed.
  • Offer-in-Compromise – You may qualify for an Offer-in-Compromise (OIC), which allows you to settle your tax debt for less than the full amount owed. To qualify for an OIC, you must demonstrate that you are unable to pay the full amount of your tax debt due to financial hardship.
  • Currently Not Collectible (CNC) Status – In cases of financial hardship, you may qualify for CNC status. This temporarily suspends IRS collection activities while you are unable to pay, although interest and penalties may continue to accrue.

How long do I have to respond to notice CP59?

The IRS recommends taking immediate action if you receive a CP59 Notice. This can help you avoid further notices, penalties, and interest.

Failing to respond promptly to Notice CP59 can lead to the IRS preparing a Substitute for Return (SFR) on your behalf, which may not accurately reflect your tax situation and could result in a higher tax liability.

When Should You Get Help with Past Due Tax Returns?

Of course, in many cases, you can handle your tax compliance issues alone. But depending on the complexity of your situation or how well organized you are, it can often be very helpful to seek the advice of a legal tax professional.

Tax attorneys, CPAs, and enrolled agents all have the expertise and experience needed to help you make sense of your past-due tax returns. They can also help you understand how to complete Form 15103 correctly and negotiate with the IRS if you have a dispute or disagreement to present.

Need help with unfiled returns? Want guidance on dealing with unpaid taxes? Curious about your options? Then, contact us today by scheduling a consultation using our online form or calling us at (404) 609-1300. At Wiggam Law, we specialize in helping people with tax problems, and we can help you respond to CP59 and deal with any other tax issues.

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