What is an IRS CP259 Notice? Causes, Consequences, and How to Respond

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Most tax issues do not begin with penalties. They begin with a letter.

You may believe your tax filing is complete and your responsibilities are fully handled. Then, unexpectedly, a notice from the IRS arrives. 

This can immediately raise questions, even when the issue itself is administrative. For many taxpayers and business owners, the first reaction is confusion.

Is this a penalty?
Is this an audit?
Did something go wrong?

Not every notice signals a penalty, an audit, or a balance due. In many cases, the IRS is simply seeking clarification to keep its records accurate and up to date.

Because tax compliance operates on reporting systems and historical data, occasional mismatches can occur. When that happens, the IRS sends a formal notice outlining what it believes requires attention.

One such notice is CP259.

What is an IRS CP259 notice, and what does it indicate?

A CP259 Notice is issued when the IRS does not have a record of a tax return that it expected you to file for a specific year. It serves as a formal alert that a required filing may be missing.

The notice generally includes:

• The tax year involved
• The type of return that appears to be unfiled
• Clear instructions on the steps you should take

Receiving this notice does not automatically mean you owe taxes. It simply indicates that the IRS system does not show the required return on file.

Common reasons why you may received a CP259 notice

There are several practical reasons why this notice may be generated.

1. The return was never filed

You may have forgotten to file for a particular year. This is common for small business owners, self-employed individuals, or people with changing income situations.

2. The IRS expects a business return

If you previously filed a business return, the IRS expects you to continue filing until you officially close the business. If you stopped filing without notifying the IRS, a CP259 may be issued.

3. Identification number mismatch

If your SSN or EIN changes, the IRS system may not properly match the return.

4. Processing delays

Sometimes returns are filed, but due to processing backlogs or errors, the IRS system shows them as missing.

Understanding the reason behind the notice is the first step in resolving it.

Why receiving an IRS CP259 notice requires immediate attention

Even if the notice results from a misunderstanding or processing issue, delaying your response can create unnecessary complications. Taking prompt action shows that you are cooperative and responsible.

Failing to respond promptly may lead to avoidable consequences. Acting quickly helps you:

• Avoid additional failure-to-file penalties
• Prevent interest from accumulating on any unpaid balance
• Stop further notices or follow-up actions
• Resolve the matter before it escalates into a more serious issue

The potential consequences of ignoring a CP259 notice

Ignoring a CP259 Notice can result in increasingly serious consequences. 

If no response is received, the IRS may:

• Assess failure to file penalties
• Charge interest on any unpaid taxes
• Prepare a Substitute for Return on your behalf

A Substitute for Return is prepared by the IRS using income information available in its records. However, this calculation generally does not include deductions, credits, or adjustments you may be eligible to claim. As a result, the tax amount assessed could be higher than what you actually owe.

Over time, continued inaction may lead to collection efforts such as tax liens or levies. What may begin as a simple reminder can gradually develop into a more complex and costly issue.

How to respond to an IRS CP259 notice

Addressing a CP259 Notice is typically straightforward when handled promptly.

1. Review the notice carefully and confirm the tax year and return type listed.
2. Check your records to determine whether the return was already filed. If so, gather proof of submission. 
3. If the return was not filed, prepare and submit it as soon as possible. Filing promptly reduces potential penalties and prevents further administrative steps.

Finally, follow the response instructions outlined in the notice. If multiple years or complex filings are involved, consulting a tax professional may help ensure accuracy.

Received a CP259 Notice? Let TaxBandits help you resolve it

A CP259 Notice can feel stressful, but it does not have to become a long-term problem. Taking timely action and responding correctly can prevent penalties and further complications. With TaxBandits, you do not have to manage IRS notices alone. You can simply upload the notice you received, and let TaxBandits guide you through the resolution process. TaxBandits offers guidance for resolving more than 50 types of IRS notices, including CP259. In many cases, you can also file the missing return directly through the software and correct the issue quickly.