IRS Notice CP518: What It Means and How to Respond

Notice CP518 means the IRS doesn't have a record of your tax return. That could be because you didn't file, you weren't supposed to file, or because they never received your return - for example, it got lost in the mail or due to a technical glitch. 

If you receive this letter, you should either file a tax return or explain why you didn't need to file. You should also reach out immediately if you received this notice or any other IRS notice in error. 

Key takeaways

• CP518 – Final reminder that the IRS doesn't have a record of your tax return.
• When it comes – Typically, arrives a few months after the tax return due date but may be a year or more afterward in some cases. Often arrives for individuals after CP59 and for businesses after CP516
• What to expect – If you don't respond, the IRS may file a return to calculate how much you owe and then start collections against you.
• How to respond – File a tax return, let the IRS know why you're not required to file, or send a copy of your return if you've already filed and it's been more than eight weeks.
• What if you disagree – Contact the IRS at the number on the notice or reach out to a tax professional to help.

What is CP518?

CP518 is an IRS notice about unfiled taxes, sent to individuals and businesses. This notice is a final demand to file your taxes or let the IRS know why you haven't filed. It also outlines how to rectify the situation if you've filed but the agency hasn't received your return.

The IRS generally includes Form 15103 when sending this notice to individuals and a similar response form for business taxpayers. In most cases, this isn't the first notice of unfiled returns. Instead, it comes after CP59 for individuals and CP516 for businesses.

How to respond - individuals

To respond to this notice, you can either file your 1040 individual tax return or send the IRS Form 15103 to explain why you don't have to file, that you already filed, or why you're filing late. 

File Form 15103 using these options:

• Complete the paper form that comes with your CP518 notice and mail it to the IRS. 
• Fill out the mobile-friendly version of Form 15103 online and submit it -- you will need an IRS online account to do so.
• Fax in the paper form once it's complete.

Form 15103 also outlines how to respond in select situations – for example, if you received this notice on behalf of a deceased taxpayer. 

How to respond - businesses

If your business receives Notice CP518, you should either:

• File a tax return and return it to the IRS via fax or using the envelope provided with the notice. 
• Complete the enclosed form to explain why you didn't need to file, why you're filing late, or that you already filed.

You can also use the response form to explain if you already filed, but you used a different business name, address, or EIN than what's on the notice. If you've gone out of business, you can use the response form to let the IRS know.

The IRS uses this notice to alert businesses about a full range of unfiled business tax returns, including 1120 corporate returns, 1065 partnership returns, and payroll returns, including 941 quarterly return, 944 annual payroll return for very small businesses, 943 for agricultural employees, and the 940 return for federal unemployment tax.

How long do you have to respond to CP518?

You usually have 30 days to respond to this notice before the IRS takes action. However, you should check the due date on the notice to make sure you respond in time. 

What if you don't respond

If you don't respond, the IRS will assume that you need to file a return for that year. If you file a return from another year showing a refund due, the IRS may hold on to that until you file this return or prove that you aren't required to file – check out who's required to file a tax return to learn more. 

The IRS may also decide to calculate your tax due using a substitute for return. If that happens, the IRS will send you a Notice of Deficiency. That gives you 90 days to respond (150 days if you're out of the country), and if you don't, the tax will be assessed against you. Then, the IRS can collect it involuntarily using tax liens, wage garnishments, bank levies, and even asset seizure.

What if I disagree with Notice CP518?

If you disagree, call the IRS at the number on the notice. Or complete Form 15103 to outline your disagreement -- for example, if you don't need to file or have already filed, you can use Form 15103 to let the IRS know.

What if I already filed my individual tax return?

If it's been fewer than eight weeks, the IRS probably generated this notice before receiving your return. The IRS says that you don't need to do anything in this situation – you can simply ignore the notice. However, to be on the safe side, you may want to check your online account to make sure the agency received your return. Or, if you filed through the mail, check your tracking number to see if the letter has been received.

What if I already filed my business tax return?

The IRS's website has slightly conflicting information for business owners. In one section, it says to ignore the notice if you filed in the last four weeks, but if you filed more than four weeks ago, you should reach out to the IRS. 

However, in another section of the same webpage, the IRS refers to the eight-week standard. To be on the safe side, let the IRS know if you filed more than four weeks ago. You should be able to see a copy of your return in your online account.

What if I filed my return more than eight weeks ago?

In this case, there may be a mistake or the agency may not have received your return. First, double-check the CP518 notice to make sure it has your correct name and tax ID number. If it's incorrect, call the IRS. If it looks right, then fill out Form 15103 and attach a copy of the tax return that you submitted. If you don't have a copy of your return, you should be able to print a copy from the tax prep software you used, or your tax pro can give you one.

What if I can't afford to pay?

Even if you can't afford to pay what you'll owe, you should still file. Filing a return stops the IRS from assessing the monthly failure-to-file penalty (5% per month, up to 25%). It also prevents the IRS from assessing tax against you using a substitute for return. The IRS has multiple payment options for taxpayers who can't afford to pay, including:

• Installment agreement - monthly payments for up to 10 years (or until the Collection Statute Expiration Date if sooner. 
• Offer in compromise – a tax settlement for less than owed, based on the equity in your assets and your disposable income.
• Currently non-collectible - a pause on collection activity if you prove that you cannot afford to pay. 

There are also additional options for special situations. A tax pro can help you figure out the best option in your situation, or if you call the IRS, they'll generally go over the basics with you.

Can I avoid penalties by responding to CP518?

You can minimize penalties by responding as soon as possible, but unfortunately, both late payment and late filing penalties are backdated to the original due date. However, you can request penalty abatement, which may be available if this is your first offense or if you had reasonable cause for not filing on time. 

Get help with unfiled tax returns now.

Need help responding to the IRS? Want to catch up on your unfiled personal or business tax returns? Curious about how to respond to the IRS? Then, use TaxCure to find an experienced tax pro today. Using the filters, you can narrow down the results to see pros who handle unfiled returns. 

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