IRS Notice CP518 Explained: What It Is and What To Do

IRS Notice CP518 is a final notice from the IRS to inform a taxpayer that they have not filed a return the IRS believes they should have.

The IRS generally sends Notice CP518 to a taxpayer if they do not file their tax return within eight weeks of receiving Notice CP59.

Here is a redacted Notice CP518 that the IRS sent one of our clients who had not filed a required income tax return.

IRS Notice CP518 At a Glance

IRS Notice CP518 Explained, Part by Part

Here is a full explanation of the Notice CP518, part by part.

Part 1: You Must File Your Tax Return

At the top of the first page of Notice CP518, you will see in plain English the IRS’s primary message in sending you this piece of mail: that you need to file your tax return for the year stated.

Now, if you didn’t file multiple years of required returns, the IRS may send you multiple CP518 Notices — one for each year.

Part 2: What You Need to Do Immediately

Then, the IRS tells you what you need to do immediately — file the missing return.

In this section, the IRS reminds you of:

• The need to sign your tax return if you are mailing it in.
• The need to include your identity protection personal identification number (IP PIN) on your return if the IRS has issued you a PIN.
• You can only e-file your tax returns for the past three years.

In the paragraph underneath the bold words “If you think we made a mistake,” the IRS also tells you about Form 15103, which should be in the same envelope as your CP518 Notice.

You can use Form 15103 to tell the IRS that:

• You have already filed your tax return for the year in the CP518 Notice.
• You do not have a filing requirement for the year in the CP518 Notice (you will have to state your reasoning on the Form 15103).

Part 3: What the IRS Says They Will Do If They Don’t Hear From You

Next, the IRS tells you what will happen if they don’t hear from you about this matter.

Although the consequences of not filing taxes can reach much further than these, the three consequences listed in this section are:

• Preparation of a substitute for return (SFR): If, after receiving Notice CP518, you do not file your required return or satisfactorily explain to the IRS why you are not required to file the return, the IRS will likely prepare its own return called a substitute for return (SFR) in order to determine your tax liability for you. To learn more about IRS SFRs, read this article.
• Loss of available deductions, credits, and refund: If the IRS prepares an SFR for you for the year in question, it will not give you any credits or deductions other than the standard deduction for the filing status it assigns you. Also, the IRS reminds you that if you are owed a refund on a tax return, you must file that tax return within three years of the due date of the return (including extensions) in order to actually get the refund; failing to do so will likely result in a forfeiture of whatever refund you would have been owed, even if you later file the return.
• Delay of refunds for other tax years: Being out of compliance with your tax filing or payment obligations may cause a delay in the IRS’s processing of your tax refunds for other tax years.

Part 4: Payment Options

The fourth part of this Notice CP518 talks a bit about the methods by which you can pay your tax bill.

And importantly, the IRS states that if you can’t pay your balance in full now, you still have some options.

Installment agreement, offer-in-compromise, and a temporary collection delay could be eligible avenues for you to explore, depending on your circumstances.

Part 5: About Your Return

In this brief section, the IRS simply informs you that it received income information pertaining to the tax return mentioned in the notice; it is this income information — further described in the next section — that gives reason for the IRS to believe that you have a tax return filing requirement for this year.

Part 6: Income Reported by Others

In this section, the IRS further elaborates on the “income information” that it mentioned in the previous section.

The IRS informs you that it received income information about you for the year in question from others, such as:

• From your employer, as reported on a Form W-2 for wages paid
• From banks, as reported on a Form 1099-INT for interest income
• From mortgage holders, as reported on a Form 1099-C for cancelled debt

And based on the figures on these forms, the IRS has determined that you have a filing requirement for the year in question.

The IRS also informs you — with instructions on how to do so — that you can see what income information has been provided to the IRS by others by looking at your wage and income transcript.

Part 7: Additional Information

Next, the IRS provides some additional information, such as:

• The official IRS webpage for the CP518 Notice
• A phone number to call if you are out of the country and need assistance
• If your home was foreclosed on, the resulting cancellation of debt may not be taxable
• The IRS’s ability to contact third parties about you for collections purposes
• Where you can obtains tax forms, instructions, and publications
• How to contact the IRS
• The Taxpayer Bill of Rights
• The Taxpayer Advocate Service (TAS)
• Low-Income Taxpayer Clinics (LITCs)

Part 8: Stub

Finally, the IRS provides you with a stab to cut out and return with your completed Form 15103.

Why the IRS Sends Notice CP518

The IRS sends Notice CP518 to inform a taxpayer that they need to file their return immediately or the IRS may begin the return of preparing their tax return for them via the SFR process.

What You Should Do If You Receive a Notice CP518

In most cases, the best thing to do when receiving a Notice CP518 from the IRS is to simply file your original tax return requested in the notice rather than waiting for the IRS to prepare an SFR for you and assess and attempt to collect taxes based on that SFR.

Now, if the year in question is from a while back, that may be easier said than done.

However, lucky for you, I have put together a guide to filing back tax returns that you can access by clicking here or by watching the video below!

Of course, if you still owe the IRS a balance due after filing your original return, you’ll need to figure out how you’re going to resolve this balance.

Now, you could simply pay whatever balance is owed in full along with penalties and interest.

But it’s generally at least worth seeing if you’ll qualify for any penalty abatement and if you really can’t pay what you owe at the moment see if you could qualify for some kind of tax relief option, such as an offer in compromise, some kind of installment agreement, being placed in currently not collectible status, or several others.

To learn more about these options, read this article about how to get IRS tax debt relief or watch the video below.

Author:

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Logan Allec, CPA, Founder and Owner

Logan Allec has been serving taxpayers as a CPA for over 14 years. After leaving his role at a "Big 4" firm, he started Choice Tax Relief to help everyday Americans who have found themselves behind on their taxes. He also educates thousands of people daily about tax relief on his YouTube channel. In addition to his CPA license, Logan also has a Master's Degree in Taxation from the University of Southern California (USC). He lives with his wife and children in the Los Angeles area. Learn more about Logan here.

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