IRS Notice CP59: What to Do and How to Respond

Millions of dollars have been completely lost over the years as a result of professional tax scams, so it makes sense to be a little skeptical if you receive a notification from the IRS in the mail. This type of letter might also cause some anxiety, too, which is completely normal.   The best way to handle your situation is to get informed about the IRS letter, identify if it’s legitimate, and then learn your options moving forward.   The good news is that your situation is entirely correctable if the notification you received is a CP59 notice. The IRS has made it clear that they’re looking to go after non-filers this year, so they expect to send out a significant number of CP59 notices. If you recently received one, then learn what to do about this type of IRS notice below.

What is an IRS CP59 Notice?

An IRS CP59 notice is an official letter that will be mailed to your address from the IRS. This important tax alert informs you that IRS records indicate you failed to file a 1040 tax return. Typically, you will receive this notice if you completely forgot to file your returns, you missed the due date, or your tax return was somehow lost in transit.   In general, you have a few options when it comes to handling your IRS CP59 notice. Your first option is to file your missing tax return as soon as possible. Once you submit your tax information, the IRS will process it promptly.    If you already filed or weren’t required to file, then you have the option of filing Form 15103 (more on that below). You also have the option of ignoring the letter (more on that below).   To determine your best course of action, you’ll need to carefully consider your tax situation, legal rights, and options. If you’re not sure what your next move should be, then it might be best to consult with a tax professional before moving forward.

What Penalties Can be Charged if Taxes Aren’t Filed or Paid?

One of the biggest reasons why it might be worth it to invest in a tax pro’s solid advice is that there are consequences of not filing or paying your taxes on time. Under the law, every citizen who earns an income above a certain threshold has a legal duty to file their tax returns by the due date every year.    A failure to file on time will result in a penalty of 5% of your unpaid tax balance getting added to your total overall tax bill. This penalty will get charged every month that your return is late and compound up to 25% of your overall tax burden. You’ll face an additional penalty of 0.5% of your unpaid tax bill every month that your balance goes unpaid.   If you are getting charged both penalties in the same month, then the failure to file penalty will be reduced by the amount of your failure to pay penalty to ensure your total penalties don’t exceed 5% of your overall tax bill per month. However, in total, both penalties can get up to 50% of your balance. 

What will Happen if You Ignore an IRS CP59 Notice?

You always have the option of ignoring your CP59 notice, but not taking any action will have consequences. First, the IRS will continue to attempt to work with you in good faith. They’ll send more notifications about your delinquent returns. If you fail to take heed of these notices, then your case will progress. The IRS may even file a tax return on your behalf, and they won’t do as well as you would in claiming deductions and credits.    Depending on the level of your delinquency, the IRS may decide to add financial penalties to the tax balance they’ve assessed for you. They’ll start to send you bills to collect, and if you still ignore these notices, then the IRS may choose to enact enforcement actions. These enforcement actions will escalate if you don’t take action. Possible collection efforts include wage garnishment, levies on your bank account or assets, a seizure of your property, or even criminal charges against you.

When with the IRS File an SFR?

A Substitute for Return (SFR) is a tax return that the IRS prepares for a taxpayer when they’ve failed to file their own returns. An SFR is appropriate only after the taxpayer has had ample time and opportunity to fill out their own returns and submit them to the IRS. In other words, the IRS won’t file an SFR until they’ve notified you about your delinquency a few times.    If you don’t file your own returns in a timely manner, then the tax agency will gather up all the financial information they have about you from third-party sources and estimate your income based on that data. Unfortunately, this type of assessment can lead to errors, overestimations, and even completely inaccurate tax bills.   In most cases, an SFR will result in a higher tax liability than a tax return that you file for yourself.

What is a Notice of Deficiency or a CP3219N?

A CP3219N is notice from the IRS that states they have not yet received a tax return from you, and you have not replied to their previous notices about not filing a return. As a result, this tax letter is meant to inform you that the IRS will be calculating your estimated tax burden by using the information they have about your financial situation. This information could come from employers, financial institutions you work with, or third parties.   The CP3219N gives you 90 days from the date on the notice to either accept the proposed tax assessment or challenge it by filing a petition with the Tax Court.

Facing IRS Collection Actions

IRS collection actions can derail your finances and stability if you don’t act to prevent them from being enforced. In the beginning, IRS collection actions will come in the form of financial penalties and fees. If you don’t make an effort to pay what you owe, then the IRS might move on to attempting to collect from you by taking a portion of your paycheck, seizing some of your assets, or attempting to take money from your bank accounts. These efforts are all legal ways that the IRS can settle your tax debt when you aren’t working with them in good faith.    If you’re facing potential IRS collection actions, then the best thing you could do is get in touch with a tax professional for more advice on what to do.

What to Do If You Disagree with the Notice?

Do you disagree with your CP59 notice? If you think you received the notice by mistake or you know that you already filed your returns, then you should fill out form 15103. This important form is enclosed with your CP59 notice.

What is Form 15103?

Form 15103, also called Form 1040 return delinquency, gives the IRS more clarity into a person’s tax situation and why they didn’t file a return. The purpose of this form is to resolve the taxpayer’s non-filing status.

How to Complete IRS Form 15103

To fill out form 15103, you’ll simply need to fill in all your contact details. Next, you will need to check off any box that describes a circumstance that applies to your situation. For instance, if you have already filed a tax return, then check the box near “I already filed my tax return.” If you don’t think you need to file a return, then you’ll need to check the box that describes why you didn’t need to file. Next, you will need to fill out the following boxes – “My total income” and “reason for not filing”.   Sign the form, and you’ll be finished with the process.

Where to Mail Your Completed 15103 Form

If you’re filing form 15103 as a New York resident, then you’ll mail off your completed form to: The Department of the Treasury Internal Revenue Service Ogden, UT 84201

What are the Options if I Can’t Pay Taxes?

Have you delayed filing your taxes because you know you won’t be able to pay off your tax bill? If so, then it’s important to know that it’s usually best to file your tax return even if you can’t pay off what you owe. Here are a few of your options if you can’t pay your taxes:

Your Guide to IRS Payment Plans

Typically, one of the best options when you can’t pay off your taxes is to negotiate with the IRS and agree to a payment plan. A payment plan allows you to pay off your tax debt bill over a period of several months or years. In exchange for making regular payments, the IRS will agree not to pursue collection efforts against you.

Your Options for Managing Penalties

Depending on your situation, you may be able to have some penalties removed from your account, which will reduce your overall tax bill. Typically, though, you’ll only be able to remove penalties when you have a genuine reason for not paying, or you’ve never experienced a tax problem in the past.

Can You Negotiate the Total of Your Overall Tax Bill?

In general, the IRS just wants you to pay what you owe, but if you’re struggling financially or experienced something that’s preventing you from being able to manage your entire debt burden, then the IRS will work with you. You might be able to negotiate the total of your overall tax bill through an offer in compromise.

Are You in Legitimate Financial Distress?

If you genuinely can’t pay off what you owe due to a financially distressing situation, then be honest with the IRS. Produce proof of your financial situation to the agency, and they’ll likely file you under ‘non-collectible status,’ which means they won’t pursue collection efforts against you unless your financial situation changes in the future.

Do You Disagree With the IRS’s Decision or Bill?

If you disagree with the IRS’s decision, notice, or tax bill, then it might be possible to file a tax appeal. If you’re considering taking this route, then it’s important to hire a tax professional to help. 

How Long Do You Have to Respond to an IRS CP59 Notice?

In general, you should respond to an IRS CP59 notice as soon as possible, but you do have some time before the IRS sends an additional notice. You will face a penalty, though, if the IRS sends you a notice about a balance due or an additional notice about your delinquency and you still don’t act.

When Should You Hire a Tax Professional to Help With Past Due Tax Returns?

You should hire a tax professional to help with your past-due tax returns if you’re not sure about your legal rights, tax options, or the best path forward. A tax professional will help ensure that you have the right information to make a good decision about your taxes, and they can also empower you to tackle your taxes and find a solution that propels you forward.

Are You Looking for a New York Tax Pro?

Have you recently received IRS notice CP59? If so, then it might be a good decision for you to speak with a tax professional if you’re unsure of how you should proceed with your tax situation.   Here at Timothy S. Hart Law Group, P.C., our team of IRS tax pros are confident that we can help you review your tax situation, identify your tax needs, and guide you in learning more about the potential tax solutions that could work to your advantage. Equipped with this knowledge, you’ll be able to make an informed decision on how to move forward with your taxes.   Our tax attorney will help you negotiate your way into the best possible position with the IRS and assist you in arranging a solution that will work for both you and the tax agency. Contact Timothy Hart today to get in touch and get started on your tax case.