How to Respond to IRS CP59 Notice

cp59 letter

If you’ve been neglecting your obligation to file your U.S. tax returns, you will likely receive an IRS CP59 notice. Receiving the letter requires urgent action. You either file your tax return or explain to them why don’t need to file. 

You must take the necessary steps or face penalties for not filing. The penalty starts at 5% of the unpaid tax each month your tax return is overdue and up to 25%.

High-Income Non-filers Are at Risk

The IRS recently increased its efforts to improve tax compliance and fairness. It focuses on individuals who earn above $400,000 and haven’t filed their returns from 2017-2021. If this sounds like you, take this as your warning. 

Starting in February 2024, the IRS will send out about 20,000 to 40,000 compliance letters weekly. While they target high-income earners, those in lower-income categories shouldn’t be complacent, as the IRS will likely come knocking at your doorstep with a tax notice as well. 

If you ever receive an IRS CP59 notice in your mailbox, here’s what it means for you:

You Might Owe the IRS

A CP59 letter is a request to file your tax return. That’s why submitting your return as soon as possible is even more critical. The penalty for late filing increases with the amount of unpaid tax and the length of the delay. The longer you wait, the higher your tax bill will become.

Your Next Step

You must read the notice carefully. It tells you which tax years are in question and what steps to take to fix the issue. 

If you must file your tax returns but haven’t done so, you must immediately send in your Form 1040. If you have a tax due, you can include your payment with your tax return or pay online.

You can ask your employer if you lack the info for your tax returns, such as your W2s or 1099s. You can also request income transcripts from the IRS. Your tax professional can also help you get this information. It’s generally best to work with a qualified expert. This is especially true if you’re filing for multiple years to ensure accurate filing. Making mistakes on your tax return can result in significant penalties.

If you filed, submit a copy of your signed and dated tax return. Also, include the completed Form 15103

The Dangers of Ignoring the CP59 Notice

In addition to penalties, non-filers who ignore the letter might get more notices. They might face more vigorous enforcement, too. This includes an audit, a collection, or criminal charges if fraud is applicable.

The IRS might also file a Substitute for Return on your behalf. They will use information from your employer or bank. This return won’t include any credits or deductions. This omission often leads to a higher tax bill. 

You will have 30 days from that point to file your return or respond to the IRS. You will receive a Notice of Deficiency if you fail to do either. The letter will show you the proposed tax assessment.

If you agree, you can sign the waiver form and pay the amount stated in the notice. Otherwise, you will have 90 days to challenge the decision. If you don’t do either again, you could face collection action such as a levy or a lien. 

Advice from Tax Experts

Receiving a letter from the IRS is never a pleasant experience. And ignoring the situation won’t make it any better.

If you’re a non-filer lucky enough not to have received any notices yet, don’t wait for the IRS to knock. File your taxes before the IRS does it for you. Doing so ensures you get all deductions and credits to lower your tax bill. Who knows, you might even score a refund!

But, if you recently got an IRS CP59 notice in your mailbox, act fast. This will prevent the IRS from taking more action. If you are unsure how to fix your situation, talk to a qualified tax pro for help.

Our team of Enrolled Agents and CPAs at Peace of Mind Tax Help have lots of experience working with the IRS. We help our clients secure favorable tax resolution results.

Call us at 775-245-4357 for a free 15-minute, no-obligation consultation meeting.

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