Failure to file often leads to tax collection actions by the IRS. When the IRS discovers that your tax return did not reach them, they file a substitute tax return on your behalf and calculate your tax liability. Based on the estimate of your tax bill, the IRS sends you notice regarding the payment of tax debt.
If you are unable to file your tax return before the filing deadline, which usually falls on April 15th, the IRS begins to treat unpaid taxes as tax debt, charging penalties and interest on the total amount of unpaid taxes. To inform you that they did not receive your tax return and have begun charging penalties and interest on the tax debt, the IRS sends Notice CP2566. The notice includes information on the tax debt amount, and allows you to clarify your stance.
If you filed your tax return within eight weeks from the date of the notice, you do not need to respond to the notice. If you want to file your tax return, you may attach the Response form and send your return to the address on the notice. If you disagree with the contents of the notice or the reason for receiving it, you will need to contact the IRS either over the phone or in writing.
Note that the IRS does not include deductions that you qualify for when calculating your tax liability. In case the IRS’ estimate of your tax liability is higher than your actual tax bill, then they may take the balance from your tax refund. Even if IRS’ estimate of your tax bill is incorrect, but you do not respond to the notices sent by the IRS, the estimate may become final.
Those taxpayers that cannot pay their full, partial or any amount of tax debt can resolve their unpaid taxes by applying for a tax debt payment plan. It will help them to stop IRS collection actions and resolve their back taxes comfortably.