You have received an IRS Notice CP518. Now what? | law of the free man

IRS Notice of Collection Proceedings 518 (CP518) is a notification that the IRS believes that a taxpayer, whether a business or an individual, has failed to file the required declaration, either on the original filing deadline or any extension of the deadline. Pursuant to 26 USC § 6212 and Treasury Regulation § 301.6212-1, the IRS uses CP518 as one of several escalating notifications to taxpayers for the tax assessment or collection process. To see IRS Guidance for CP 518 Business and IRS Guidance for CP 518 Individual.

Last known mailing address.

Pursuant to Section 6212, if the IRS determines that there is a deficiency with respect to any federal income tax, including any excise duty permitted by Chapter 42 of the Internal Revenue Code, the IRS is authorized to send a notice of deficiency to the taxpayer by certified mail or registered mail. Notice CP518 must include notice to the taxpayer of the taxpayer’s right to contact a local office of the Taxpayers’ Advocate and the location and telephone number of the appropriate office.

Documentary evidence of the IRS sending a CP518 notice to the taxpayer’s last known address is sufficient for a notice of deficiency to have been properly mailed. To see 26 USC § 6212(b); Treasury Regulations § 301.6212-1(b). If a taxpayer has a legitimate basis to claim that a CP518 notice was not properly delivered, the taxpayer may dispute a CP518 notice on that basis. However, a taxpayer’s unsubstantiated statement “I don’t recall receiving the notice” is usually an argument that is rejected by the United States Tax Court. See Golditch v. Comm’r, Memo TC. 2022-26 (29 March 2022); see also Freeman Law Insights Blog at Golditch.

Break, but Take action Give to (or deposit with) Caesar what is his, if and as required by the Internal Revenue Code.

Any return that was due to be filed but was not must be prepared and filed with the IRS, even if it is overdue. The IRS guidelines for a CP518 convey a sense of urgency or immediacy to file the return that was due to be filed but was not. But, haste often causes “unpleasant things”.

A taxpayer is advised to pause, closely assess what tax returns were required and have or have not been filed, and prepare accurate returns as needed to comply with tax filing obligations. The individual taxpayer who receives a CP518 must also complete and submit IRS Form 15103 (Form 1040 Delinquency), explaining why the taxpayer filed late, failed to file, or has already filed all required returns. A CP 518-related portion or stub must be submitted with Form 15103. Taxpayers of business entities will also be asked – usually through CP518 – to complete and submit a similar explanatory response form that accompanies CP518.

The “pause” when filing an overdue return must be reasonable so that the IRS does not itself prepare and file a substitute return, which the IRS is permitted to do (and without any particular time limit ). A dilatory or consenting attitude is not recommended.

Replaces the return.

When a taxpayer fails to file the required return, the IRS may prepare, for tax assessment purposes, a substitute return showing, for example, taxes owing, generally, and additional taxes under item 6651. To see 26 USC § 6020(a) (“If a person fails to make the required declaration… the [IRS] can prepare such a statement. . . ”); identifier. § 6651(g)(2) (permitting additions to tax in lieu of yield). Also, if no return is filed and the IRS prepares a replacement return, the taxpayer has made no election for deductions and cannot claim itemized deductions later. See Salter v. Comm’r, Memo TC. 2022-9 (April 5, 2022); George v. Comm’r, Memo TC. 2019-128, 118 TCM (CCH) 294, 296, aff’d by curiam821 F. App’x 76 (3rd Cir. 2020); to see Zaklama versus Comm’r, Memo TC. 2012-346, 104 TCM (CCH) 760, 777.

Unless a taxpayer can prove that the failure to file a return was due to reasonable cause and willful negligence, additional tax may be imposed, and the burden of proof on the IRS to maintain the assessment determined in a declaration substitute is not onerous. To see 26 USC § 6664. To establish reasonable cause, the taxpayer must demonstrate that he exercised ordinary commercial care and prudence, but was nevertheless unable to perform his obligations. United States vs. Boyle469 US 241, 245-46 (1985).


It is very important that a taxpayer who receives a CP518 notice acts quickly but carefully to resolve the situation before it escalates. If a taxpayer refuses or fails to prepare and file a required return, the IRS may itself prepare and file a substitute return, and in such event the taxpayer will be at a disadvantage in claiming, for example, available itemized deductions and other legal offsets for tax liability as permitted by the Internal Revenue Code. Indeed, the law – sometimes even the tax code – helps the self-serving, the vigilant, rarely the sleepy, and never acquiescence. If a taxpayer receives a CP518, acquiescence is misguided. Upon receipt of CP518, assess, connect with knowledgeable professionals, if necessary, and take on potential tax filing and liability that the IRS believes is exceptional.

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