The LTR 5699 is the IRS asking your business entity why it didn't file a tax return. The IRS expected a return based on your entity's filing history, EIN registration, or information reported to them by third parties. They didn't get one and they want to know why.
Who Gets This Letter
Any business entity that has an EIN and a filing obligation can receive an LTR 5699. Partnerships that didn't file Form 1065, S-Corporations that didn't file Form 1120-S, C-Corporations that didn't file Form 1120, exempt organizations that didn't file Form 990, and employers that didn't file employment tax returns (Forms 941, 940).
You may also receive this letter if your business has closed but you didn't file a final return. The IRS continues expecting returns until they receive a final return marked as such or until you notify them the entity is no longer operating.
The Consequences of Not Responding
If you don't respond, the IRS may file a Substitute for Return for the entity, assess tax based on income information they have from third parties, assess late-filing penalties ($235 per partner/shareholder per month for partnerships and S-Corps), and begin collection on the assessed balance.
For exempt organizations, failure to file Form 990 for three consecutive years results in automatic revocation of tax-exempt status. Getting exempt status reinstated is expensive and time-consuming.
How to Respond
If the business is still operating, file the delinquent return immediately. If the business has closed, file a final return and check the "final return" box. If the business was never required to file (never had activity, for example), respond to the letter explaining why no return was due.
If you're filing late, request penalty abatement through First-Time Abatement or reasonable cause when you respond. Filing the return and requesting abatement simultaneously is more efficient than waiting for the penalty notice and requesting abatement separately.
If you've received an LTR 5699, call us at (813) 229-7100. We'll get the return filed and work on minimizing the penalties.