What the notice means
The IRS CP2566 page: “We didn’t receive your tax return, so we calculated your tax, penalty and interest based on wages and other income information reported to us by employers, financial institutions, and others.” The options are to file the return or to “accept and pay our proposed amount due” by signing the Response form. The page adds the key point: “Filing may reduce the amount due (if you are eligible to claim certain expenses or deductions).”
The IRM calls this the 30-Day Letter, Letter 2566. IRM 5.18.1.2 states the authority: “ASFR prepares Substitutes for Return under the authority of Internal Revenue Code (IRC) 6020(b). Statutory Notices of Deficiency are issued under authority of IRC 6212.” A variant, Letter 2566R, is sent when the account carries a delinquent return refund hold indicator. The CP2566 is a proposal; nothing is assessed yet.
Why the client got it
The client's year went through the return delinquency notices (CP59 and CP518) and was referred to ASFR. IRM 5.19.2.6.4.3 describes the target population: non-filers “for whom income information is available to substantiate a significant income tax liability without costly field investigation.” IRM 5.18.1.2 says the program “determines and assesses the correct tax liability by: Securing valid income tax returns from taxpayers, or Computing tax, penalties, and interest based on Information Reporting Program (IRP) information submitted by payers.” Cases arrive from the TDI inventory or as referrals from ACS and the field.
The computation is mechanical. IRM 5.18.1.6.11.2: “ASFR only uses filing statuses of single or married filing separately when preparing a proposed assessment for the 30-Day Letter.” The income side is whatever payers reported; nothing a taxpayer would put on the return to reduce it (dependents, credits, itemized deductions, basis or business expenses that are not on an information return, joint rates) is part of the computation. IRM 5.18.1.6.3: “ASFR systemically calculates tax, penalties and interest to 28 days from the issuance date of the 30–day letter.” If the IRS later changes an item, the module “must be updated to reissue a new 30-Day Letter, or the proposed assessment will not be recalculated.”
The penalties are built in. IRM 5.18.1.9.2.3.17: “The Failure to File (FTF) and Failure to Pay (FTP) penalties are assessed on all balance due ASFR and Reconsideration returns, unless the penalties are waived or abated due to establishment of Reasonable Cause, First Time Abatement, Statutory Exceptions, Administrative Waivers or Correction of Service Error,” and the estimated tax penalty is assessed where installments were underpaid. See failure to file and First Time Abate.
Deadlines and what happens if they pass
| Step | Timing | Source |
|---|---|---|
| Letter 2566 (CP2566) issued | After the module passes the pre-30-day TIF check; a copy goes to a POA on file with ASFR | IRM 5.18.1.6.5 |
| Response due | 30 days from the letter date | IRM 5.18.1.6.5 |
| Pre-90-day check | At the end of the suspense period if no or insufficient response | IRM 5.18.1.6.6 |
| Letter 3219 (CP3219N) issued | Certified mail; 90 days (150 outside the U.S.) to petition | IRM 5.18.1.6.6; IRC 6213(a) |
| Default assessment | After the 90-day suspense with no return or petition | IRM 5.18.1.6.11.53 |
IRM 5.18.1.6.5: “The letter gives the taxpayer 30 days to respond.” The exact system suspense period is redacted in the public IRM. IRM 5.18.1.6.6: “At the conclusion of 30-Day Letter suspense period, if there is no/insufficient response, ASFR requests TIF check 2,” and if the module passes, “ASFR generates a Statutory Notice of Deficiency (90–Day Letter).” That is the CP3219N.
Extensions exist only before the 90-day letter. The telephone script in IRM 5.18.1.9.1.1 says: “If 90-Day Letter has not been issued, explain the taxpayer has additional time up to the current ASFR 30-day follow up date. If a 90-Day Letter has been issued, explain an extension cannot be granted once the 90-Day Letter has been issued.”
IRM 5.18.1.6.5: “If the taxpayer has a POA updated to ASFR, a duplicate 30-Day Letter is systemically addressed and mailed to the POA.” A Form 2848 filed with the CAF unit for the year does not reach the ASFR system by itself; send a copy with the response so later letters, including the notice of deficiency, copy the representative.
How to respond
- Pull the wage and income transcript for the year. The payer documents on it are the ASFR case minors; compare them to the notice and to the client's records. See transcripts.
- Prepare the actual return with the correct filing status, dependents, basis, business expenses, deductions and credits. The IRS page says a return for one of the past two years may be e-filed; otherwise mail it. Sign and date it (both spouses on a joint return) and include the IP PIN if the client has one.
- Complete the Response form from the notice and send it with the return in the envelope provided, to the ASFR address on the letter, not to the normal Submission Processing address. The page says to check that the name, SSN and year on the notice match the return.
- If the client agrees with the proposal (rare, but possible for a wage earner with no deductions), sign the Response form consent and arrange payment; see installment agreements. Consider whether First Time Abate or reasonable cause applies to the failure to file and failure to pay penalties before consenting.
- If the client is not required to file (income below the threshold, or a joint return was filed under the spouse's SSN), call the number on the notice or write; IRM 5.18.1.9.1.1 has employees research for a joint return and close the case if one was filed.
- If the income is not the client's, raise identity theft now. IRM 5.18.1.9.1.1 says substantiation is required and gives 30 days (case suspended 45 days) to provide it, after which the ASFR process continues.
- Diary the date. If no return has been accepted when the 30 days run, expect the CP3219N and treat its 90-day period as the controlling deadline.
What the IRS does next
A return received in response is screened and processed: IRM 5.18.1.6.1 says that when ASFR returns are received with the TC 971 AC 143 on the account, the ASFR system is updated and “the returns will be shipped to the nearest submission processing site.” The module closes in status 103 (return secured after the 30-day letter) and the tax, penalties and interest are assessed from the return, not the proposal. A signed consent closes in status 100 and the proposed amount is assessed. A joint return filed under the spouse's SSN closes the module as filed jointly.
No response, or an insufficient one, leads to the pre-90-day check and the notice of deficiency. After that, a return is still accepted but is processed as a post-90-day return (status 105) if it arrives before default, or as an ASFR reconsideration after a default assessment has posted; see audit reconsideration and substitute for return and ASFR. A substitute for return is not a return for refund statute purposes: the CP3219N page says that to receive a refund the client “must file the return within three years of the due date for the specific tax year.”
Related notices
- CP3219N: the ASFR notice of deficiency that follows this letter.
- CP518 and CP59: the return delinquency notices that preceded it.
- CP2000: the underreporter proposal when a return was filed but income is missing.
- Letter 3219: the notice of deficiency in an examination case.
Questions practitioners ask
Why is the proposed tax so much higher than the real liability?
ASFR uses single or married filing separately rates and builds income from payer data, with no dependents, credits or deductions beyond the standard deduction. IRM 5.19.2.6.4.5.4 has employees tell taxpayers it uses the highest rates with only the standard deduction. Filing the return corrects all of that.
Where does the return go?
To the ASFR address on the notice with the Response form, in the envelope provided. A return mailed to the regular service center address can take months to connect with the ASFR module.
Can we get more than 30 days?
Before the notice of deficiency, yes: IRM 5.18.1.9.1.1 says the taxpayer has time up to the current 30-day follow-up date and employees can extend it. Once the 90-day letter issues, no extension is possible.
Does signing the Response form waive anything?
It consents to assessment of the proposed amount, which ends the deficiency procedures for that amount. The client can still file a return later and request reconsideration, but the assessment and collection proceed in the meantime.
Does the CP2566 carry appeal rights?
Not formally. The IRS page says to call if the client disagrees. The statutory right arrives with the CP3219N: a Tax Court petition within 90 days.
Will the IRS prepare the return if asked?
It will proceed with the ASFR assessment. IRM 5.19.2.6.4.3 has employees warn that the program uses the highest rates and that penalties and interest run until the account is paid.