CP518A Notice: Final Notice of Unfiled Individual Return

What is the Purpose of a CP518A Notice?

Imagine receiving a letter from the IRS saying, “Hey, we haven’t seen your tax return!” That, in essence, is what a CP518A Notice does. It’s a final attempt by the IRS to get your attention before they move on to more serious actions. They’ve likely sent earlier notices, but this one is the last chance to act. Think of it as the IRS ringing the doorbell one last time before using their key. The purpose is to inform you that they have not received your individual tax return and to prompt you to file immediately. This is not something you want to ignore.

Why Did I Receive a CP518A Notice?

The primary reason for receiving a CP518A notice is that the IRS has no record of your filed tax return for a specific tax year. This might occur for a few reasons:

• You didn’t file: This is the most obvious reason. You simply didn’t submit your tax return by the filing deadline (or the extended deadline, if you requested one).
• The IRS didn’t receive it: Sometimes, though rare, tax returns can get lost in the mail, or there might have been a processing error. However, this is not common, it’s more likely the return wasn’t filed.
• You filed the wrong form: If you filed the wrong tax form, the IRS might not be able to process it, and would treat it as an unfiled return.

The notice will clearly state the tax year for which the return is missing. It’s crucial to check this information carefully to ensure you are addressing the correct tax year.

What Happens If I Ignore the CP518A Notice?

Ignoring a CP518A Notice is not a good idea. It can lead to several unpleasant consequences. Here are a few things that may happen:

• Substitute for Return (SFR): If you don’t file your return, the IRS has the right to prepare a substitute tax return for you based on the information they have. This might come from your W-2 forms and other information reports. The IRS will calculate your tax liability and bill you for any taxes due. This substitute return often doesn’t include all deductions or credits you may be eligible for, so you could end up paying more tax than you actually owe.
• Penalties and Interest: When you don’t file on time, the IRS will charge you penalties, and those penalties are higher for late filing than for late payment. Interest also accrues on any unpaid taxes from the original deadline. The longer you wait, the more penalties and interest you’ll accrue, making your total tax liability significantly higher.
• Collection Actions: Once the IRS has assessed your tax liability, they may take collection actions, such as:
  • Tax Liens: A tax lien is a legal claim against your property, making it difficult to sell or borrow against your assets.
  • Levies: The IRS can seize your assets, like bank accounts or wages, to pay off your tax debt.
• Possible Criminal Charges: While less common, a continued pattern of not filing can lead to criminal charges for tax evasion. The IRS considers tax evasion a serious crime.
• Loss of Refund: If you were due a refund and didn’t file your taxes, the refund is kept by the IRS after a certain period, and can be lost.

The key takeaway here is to not let things escalate. Ignoring the CP518A notice is like ignoring a dripping faucet that’s about to flood your house.

How Do I Respond to a CP518A Notice?

The first step in responding to a CP518A Notice is to act immediately. Don’t panic, but do address it. Here’s what you should do:

1. Verify the Information: Carefully review the notice. Check that your name, social security number, and the tax year referenced are correct. If there’s an error, contact the IRS right away.
2. File your Tax Return (If You Haven’t Already): If you haven’t filed, file your tax return as soon as possible. You can file electronically or by mail. Make sure you use the correct tax form for the tax year specified in the notice. You must file the return to avoid the penalties and other actions mentioned above.
3. Pay What You Owe: If you owe taxes, pay them as soon as possible. You can pay online, by phone, or by mail. If you can’t pay the full amount, explore options like an installment agreement or offer in compromise, which we’ll discuss in more detail.
4. Provide Proof of Filing (If You Did File): If you believe you already filed your tax return, provide proof of filing to the IRS. This may include:
   • Copy of the Filed Tax Return: Keep a copy of any tax return you submit, and include it with your response to the CP518A Notice.
   • Proof of Mailing: If you mailed the tax return, use a certified mail receipt or tracking information.
   • Confirmation of Electronic Filing: If you e-filed, include the electronic confirmation number.
5. Respond in Writing (If Required): The CP518A notice will likely instruct you to respond in writing within a specific timeframe. If this is the case, respond to the specific address indicated on the letter and keep a copy of your response for your records.
6. Consider Professional Help: If you’re overwhelmed, it’s best to seek professional help from a tax professional. They can help you navigate the process and avoid any costly mistakes. They can help you file your return, respond to the notice, and communicate with the IRS.

What About Penalty and Interest Abatement?

The IRS may waive penalties in certain situations. If you believe you have reasonable cause for not filing on time, you can request penalty abatement. Some common reasons for penalty abatement include:

• Serious Illness: If you or an immediate family member suffered a serious illness or injury.
• Natural Disaster: If you were affected by a natural disaster that prevented you from filing on time.
• Death of a Loved One: The death of an immediate family member can be a reason for penalty abatement.
• Other Unavoidable Circumstances: You may qualify for penalty abatement for other unavoidable circumstances beyond your control, such as a fire or theft of records.

You’ll need to prove these reasons to the IRS. You must respond to the CP518A notice and request an abatement. The IRS will review your situation and decide if the penalties can be waived. Interest, however, is rarely abated.

What If I Can’t Pay the Taxes I Owe?

If you owe taxes and can’t afford to pay them all at once, you have options. The IRS may allow you to:

• Set up an Installment Agreement: An installment agreement allows you to pay your taxes in monthly payments. You will still be charged interest and may be charged a penalty to set up the agreement.
• Offer in Compromise (OIC): An OIC allows you to settle your tax debt for a lower amount than what you owe. However, this option is generally only available if you are experiencing significant financial hardship and meet strict IRS requirements. This is a complex area, so it’s best to consult a professional.

Key Takeaways: What You Must Know

The CP518A Notice is serious and should not be ignored. Here are a few important points to remember:

• Act Fast: Time is of the essence. The sooner you address the notice, the better.
• File Your Tax Return: If you haven’t filed, do so immediately.
• Pay What You Owe: If you owe, try to pay as much as you can to avoid further penalties and interest.
• Provide Proof of Filing: If you believe you filed, provide proof.
• Consider Professional Help: Don’t hesitate to seek help from a tax professional.

This notice is not meant to scare you, but to prompt you to take action. By addressing it promptly, you can avoid further complications with the IRS and get your tax situation back on track. Being proactive and informed is your best defense when dealing with IRS notices.