The CP59 is straightforward: the IRS expected a tax return from you and didn't get one. Maybe you didn't file. Maybe you filed but the IRS didn't process it. Either way, the IRS is putting you on notice that they're aware of the gap and they want it resolved.
This is the first notice in the non-filer sequence. It's the polite one. The ones that follow are progressively less polite, and the one at the end of the sequence involves the IRS filing a return for you that's almost guaranteed to be worse than anything you would have filed yourself.
Why You Got a CP59
The IRS receives income information from your employers, banks, brokers, and clients. W-2s, 1099s, and other information returns tell the IRS how much you earned. If that income exceeds the filing threshold and no return shows up, the IRS generates a CP59.
Sometimes the CP59 is wrong. You filed your return, but the IRS hasn't processed it yet. Or you filed under a different Social Security number due to a name change. Or your income was below the filing threshold and you weren't required to file. If any of these apply, respond to the CP59 explaining the situation and include documentation.
What Happens If You Don't Respond
The CP59 is followed by the CP515, then the CP516, then the CP518. Each one is more urgent. After the CP518, the IRS files a Substitute for Return (SFR) based on the income information they have. The SFR calculates your tax using only the income reported to the IRS with no deductions beyond the standard deduction, no credits, and single filing status. The result is always a higher tax bill than you would owe on a properly filed return.
Once the SFR is assessed, you're in collection with an inflated balance. Getting it corrected requires filing your own return and waiting months for the IRS to process the adjustment. Meanwhile, penalties and interest accrue on the inflated amount.
If You Haven't Filed
File. Now. Not next month. Now. Every day you wait adds to the failure-to-file penalty, which runs at 5% of the unpaid tax per month up to 25%. If you owe $10,000, the failure-to-file penalty alone can add $2,500 to your bill.
If you're missing records, reconstruct what you can. Request your Wage and Income Transcript from the IRS, which shows all income reported to them. Use bank statements to estimate business expenses. A late return with estimated numbers is better than no return, and it's vastly better than an SFR.
If You Filed but the IRS Doesn't Have It
Send a copy of the return you filed with proof of filing. If you e-filed, your e-file confirmation is your proof. If you mailed it, hopefully you kept a copy and your certified mail receipt. If you have neither, file a new copy and include a cover letter explaining that this is a resubmission of a previously filed return.
Refunds You Might Be Losing
Here's what most non-filers don't consider: you might be owed money. If your employer withheld taxes from your paycheck and your total tax liability is less than the withholding, you have a refund coming. But you can only claim it by filing. And you generally have only three years from the original due date to claim a refund. After that, the money belongs to the IRS permanently.
I've seen clients recover thousands of dollars by filing delinquent returns they assumed would result in a balance due. Don't assume you owe. File and find out.
If you've received a CP59 or you have unfiled returns, call us at (813) 229-7100. We file delinquent returns every week.