IRS Notice CP59: How to Deal With Unfiled Tax Returns

If you don't file your tax returns, the IRS may take months or even years to reach out to you about the issue, but once you receive a notice, you are on the agency's radar and need to take action as soon as possible. The IRS sends a few different notices to people with unfiled taxes, but the CP59 notice is one of the most common. 

Have you recently received a CP59? Then, keep reading for details on what to do, or use TaxCure to find a tax professional to help you catch up on your unfiled returns. 

What to Expect With CP59 in 2024

In 2024, the IRS announced plans to reach non-filers with a focus on high-income taxpayers. The agency is sending out 20,000 to 40,000 CP59 notices per week during the first few months of 2024, and the agency has said that it will issue substitute for returns (SFR) and CP3219N notices to people who ignore the CP59 notice. 

The agency reports that it has about $100 billion in unreported income related to taxpayers who didn't file from 2017 onward. At the time of writing, the IRS is working on 125,000 cases of unfiled returns. Approximately 100,000 cases involve filers with incomes between $400,000 and $1 million, and 25,000 cases related to income of $1 million and over. 

Note, however, that these numbers on based on income records the IRS has received for non-filers. Once these taxpayers file returns reporting their deductions, their actual income may end up being much lower. 

What Is IRS Notice CP59?

CP59 is an IRS notice about unfiled tax returns. The IRS sends this notice to taxpayers when it has no record of them filing a tax return. If you don't respond to this notice, the IRS may file a return on your behalf and then attempt to collect the balance due. 

Form 15103 (Form 1040 Return Delinquency)

The IRS generally sends Form 15103 with Notice CP59. If you have already filed a return, don't need to file a return, or received this notice for a deceased person, you should complete this form and send it to the IRS. However, you generally don't need to complete this form if you agree with the information in the CP59 notice.

The IRS doesn't publish an address that you should use when you mail in Form 15103. Use the address on your CP59 notice and return this form in the provided envelope. Alternatively, you can fax in the form using the fax number noted on the CP59.

Deadline for Responding to Notice CP59

Look for a response deadline on your CP59 notice. Typically, the IRS requests a response within 30 days. Unfortunately, the IRS doesn't publish details about when you should respond to this notice on its website, but ideally, you should respond as soon as possible. 

How to Respond to Notice CP59

If you receive this notice and you were supposed to file a return, get your past-due return filed as quickly as possible. Most tax prep software lets you file the last three years of returns, but you may have to print and mail the returns rather than e-filing. If you need to go further back or if you want help preparing your returns, reach out to a tax professional. 

Tax pros experienced with unfiled returns will also be able to help you obtain wage and income documents and/or reconstruct business records as needed. Keep reading for more tips on how to respond to this notice in different situations. 

What if you didn't need to file a tax return?

Notice CP59 doesn't necessarily mean that you need to file a return. It merely indicates that the IRS has not received a return from you. If you get this notice and you believe that you don't need to file for the year indicated on the notice, you should complete Form 15103 (Form 1040 Return Delinquency). 

Go to the middle of the form, note the tax year, and explain why you don't need to file. You must mark your filing status, whether you are over age 65 years, have a spouse over age 65 years, are blind, or can be claimed as a dependent on someone else's return. Also, note if you are not a US citizen or permanent resident and whether or not you performed work in another country.

This information helps the IRS calculate the minimum filing threshold for your situation. Then, you note your total income and the reason for not filing. For instance, say that your income was $10,000 and your filing status was head of household. In this case, you would simply write that you didn't need to file because your income was below the filing threshold for your filing status. 

Keep in mind, however, that income alone is not the only factor when determining whether or not you need to file. For instance, if that $10,000 were self-employment income, you would need to file. There are also all kinds of other, relatively rare, situations where you may need to file even if your income is under the threshold - for example, you owe Social Security tax on unreported tip income.

What if you already filed your tax return?

If you receive CP59 and you've already filed, your return and this notice may have passed each other in the mail, or the IRS may have misplaced your return. If you filed in the last eight weeks, the IRS says that you don't need to do anything. Just disregard this notice. However, to be on the safe side, you may want to set up an online IRS account to check the status of your return. 

Filed more than eight weeks ago? Then, complete Form 15103 and send it to the IRS by the deadline noted on your CP59 letter. Fill out the info at the top of the form. Then, tick the box that says you already filed a return for x tax year and note the name on the return, the tax return year, and the date filed. Also, include a signed and dated copy of the tax return. 

What if you receive CP59 for a deceased person?

You should also use Form 15103 in this situation. Again, fill out the information on the top. Then, go down to the middle of the form and note the date of death. If you filed Form 1041 (Income Tax Return for Estates and Trusts) instead of Form 1040, mark that box, and note the name on the tax return and the EIN you used for the estate.

What Happens If You Ignore CP59?

If you ignore CP59, the IRS will take matters into its own hands. The agency may send a couple more notices requesting that you file, and eventually, if you still don't respond, the agency may file a substitute for return (SFR). The IRS uses income information received from other parties to generate these returns, but it does not include any deductions or credits. 

In most cases, SFRs lead to higher-than-necessary tax liabilities, and to let you know about the tax due, the IRS will send Notice CP3219N (Notice of Deficiency). If you don't respond to this notice within 90 days, the IRS will assess taxes against you, and at that point, the agency will add on penalties and interest and start the collection process.

Penalties for Not Filing Tax Returns

If you don't file a tax return, you will incur both the failure-to-file and the failure-to-pay penalties. Both of these penalties apply monthly and can get up to 25% of your balance each (50% of your balance total). The penalty for not filing is 5% of your tax debt due per month, while the failure to file penalty ranges from 0.5% to 1% per month. 

Once the IRS assesses tax against you by issuing an SFR, the failure-to-file penalty is likely to be maxed out, so your total due will instantly be 25% higher than the initial tax liability. For instance, if you owe $10,000, the penalty will be $2,500. The failure-to-pay penalty stacks on top of this amount, and the IRS also assesses interest on your balance due.

FAQs About CP59

What if I disagree with the CP59 notice?

If you disagree with this notice, respond to the IRS as soon as possible. The most popular reasons for disagreement are 1) you already filed, 2) you don't need to file, or 3) you received CP59 for a deceased person. You can address all of these concerns by filing Form 15103. If you disagree with the notice for any other reason, contact a tax professional for guidance.

What if I didn't file because I can't afford to pay?

Even if you cannot afford to pay, you should still file a tax return. Once you file, contact the IRS to request a payment plan or another arrangement for your tax debt. If you cannot afford to make monthly payments, you may be able to qualify for a lump sum settlement through the IRS's offer in compromise program, and if you cannot afford to pay anything, you may be able to get the agency to mark your account as currently not collectible.

What if I'm self-employed and didn't file?

Being self-employed generally requires you to pay estimated taxes and file a tax return to show your profit and loss to determine your tax liability. Companies are required to report payments to contractors that are over a certain amount, so the IRS will know if you didn't file because they will receive notification of payments and won't be able to match with a tax return. 

Can I e-file past-due returns?

The IRS accepts e-filed returns for the two most recent prior years, but that doesn't mean that all tax prep software offers this capability. If you cannot e-file, mail your tax returns to the IRS. Most tax prep software will help you prepare old tax returns that you can print out if the service doesn't support e-filing for the year in question.

Should I file a tax return if the IRS doesn't require it?

Even if you're not required to file a tax return, you may still want to so that you can collect tax credits. If you receive CP59 and you're not required to file, you should send the IRS Form 15103, but also, consider filing so that you can claim a refund. Note that you only have three years from the filing deadline to claim tax refunds.

What does Notice CP59 look like?

Notice CP59 features the IRS logo in the top left corner, and the notice, notice date, tax year, and other details in the right corner. It says that you didn't file tax returns for a certain year, and then, it outlines your options for getting into compliance. Here is an example of the CP59 that the IRS sent many taxpayers about unfiled 2017 tax returns. 

When to Hire a Tax Pro to Help With Unfiled Tax Returns

People get behind on their tax returns for a lot of different reasons. Sometimes, they just get busy and forget to file. Other times, they don't file because they don't have the information they need to file - especially if they are small business owners or freelancers who got behind on their bookkeeping or lost their records. Regardless of the situation, here's when you should call in the pros for help:

• You don't want to do your own tax returns - the tax code is extremely complex and a lot of people hire professionals to help with their filing obligations. 
• You are missing income information - if you have lost your W2s or other income documents, you can try to retrieve them on your own or hire a tax preparer to help you.
• You need help reconstructing business profit and loss info - CPAs, enrolled agents, and tax attorneys who deal with unfiled returns can also help you reconstruct data as needed.
• You aren't sure where to start - Regardless of your situation, a tax pro can point you in the right direction and help you take care of everything. 
• You can't afford to pay your tax debt - The IRS has online tools that make it easy to request a payment plan once you file your return, but if you want to explore other options such as offers in compromise or innocent spouse relief, you should contact a tax pro.

Tax professionals deal with all kinds of situations. Regardless of why you didn't file, they can help you get back into compliance with the IRS. To get help now, use TaxCure to search for a Certified Public Accountant (CPA), tax attorney, or enrolled agent. With the TaxCure search feature, you can look for local pros in your area, filter your results by experience, and look at reviews to find the best fit for your needs.