IRS Notice · CP516

CP516: the second request, and the sentence it adds

A CP516 is the second time the IRS has asked for a return it never received. It adds one sentence the first letter did not have — "We may determine your tax for you" — and that sentence, read properly, is the whole notice.

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It reads like the same letter again, and in most respects it is. Same request, same absence of any deadline, same lack of any amount owed. The IRS's own description is almost apologetic about the repetition: "We sent you a previous notice; however, we still don't have any record that you filed your prior year tax returns."

One line is new, and it does not sound like a warning. "We may determine your tax for you." Read casually that is the IRS offering to sort it out. It is the opposite. It means the IRS will compute a figure using only what other people reported about you — no deductions you did not claim, no credits, filing status set to single or married filing separately — and that figure becomes what you owe.

Nothing has been assessed yet, and no deadline for replying is printed on this notice either. One date is printed — the day by which a refund for that year has to be claimed — and it is in the same consequence list as the new sentence. What has changed is that the process which produces a number has been named.

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Key takeaways

•A CP516 is a second request for a return the IRS has no record of. Its own words: "We sent you previous notices asking that you file your tax return… However, we still haven't received any response from you."
•No response deadline is printed on it, exactly as with the CP59. The IRS's page says only that you need do nothing if you filed within the last eight weeks. The notice does print the date by which a refund for that year must be claimed — that date is on your copy.
•The new sentence is "We may determine your tax for you." That is the IRS naming, in the mildest available language, the process that ends in a bill computed without you.
•The phrase "substitute for return" does not appear on this notice — or on any of the individual non-filer notices. The concept arrives before the words do.
•Your refund for that year is still expiring on its own schedule, generally three years from the original due date, whatever this letter does or does not say.
•Filing is not the only response. If you were not required to file for that year, telling the IRS so — using the instructions on your notice — is the other route, and for some readers it is the right one.

What a CP516 is

A CP516 is the IRS's second written request for a return it expected and has not received. The notice: "We sent you previous notices asking that you file your tax return Form 1040 for [year]. However, we still haven't received any response from you."

Structurally it is the CP59 again, plus one line. No tax has been assessed. No amount is stated. No deadline is printed. The IRS's page confirms the only timing element is an inbound one — "You do not have to do anything if you filed your tax return within the last 8 weeks" — which exists because notices and returns cross in the mail.

The line that is new is the one worth decoding, and it appears in the notice's list of what happens if the IRS does not hear from you:

"We may determine your tax for you." "Penalty and interest charges will accrue on any unpaid balance we determine you owe." "You risk losing your refund if you don't file your return. If you are due a refund for withholding or estimated taxes, you must file your return to claim it by [date] plus any extensions of time to file. The same rule applies to the right to claim tax credits such as the Earned Income Credit." "If we owe you a refund for another tax year, your unfiled return may delay your refund payment for the other year."

"We may determine your tax for you"

Six words, and they describe a process with a specific and unfavorable arithmetic.

When the IRS computes a return for someone who has not filed, it works from third-party information — W-2s, 1099s, broker statements, anything reported about you by someone else. That is all it has. So the computation includes every dollar of income anyone reported, and none of the things that reduce it.

The IRS says what this costs, in its own words on the notices further down this sequence: it computes "using a filing status of 'single' or 'married filing separate'", and "This means you may not receive certain exemptions, deductions, or credits that you would otherwise receive if you filed your own return."

We are not going to tell you by how much that raises the number, because it depends entirely on your year and any figure would be a guess dressed as a fact. What is certain is the direction and the reason: the IRS is not being punitive, it is working with less information than you have. Filing your own return is the only mechanism by which the rest of the information reaches them.

A note on vocabulary, because it will confuse you when you search. Practitioners call this a "substitute for return," or SFR. That phrase appears nowhere on the CP516, or on the CP59, or on the CP518. The IRS's internal manual describes these notices as informing taxpayers that it can prepare a substitute return — and the notices themselves say only "we may determine your tax for you." If you have read about SFRs and cannot find the term on your letter, that is why.

Sources: IRS Notice CP516 specimen, irs.gov, read 6 September 2026. IRS Notice CP2566 specimen, read 6 September 2026, for the filing-status language.

Your clock

There is no deadline on a CP516. Nothing on the notice is dated and nothing forfeits a right if you do not respond by any particular day.

Two periods are nonetheless running, and only one of them is in your favor.

The IRS's assessment period has not started, because for an unfiled year it does not begin until you file. Under IRC 6501(c)(3) the tax may be assessed "at any time."

Your refund period is running down, generally three years from the original due date of that year's return, and it cannot be reopened once it closes. The reason it started without you is that tax withheld from wages counts as paid on the original due date — IRC 6513(b)(1) — so the clock has been running since a date that has already passed. Your notice prints the resulting date.

And a third thing that is not a clock but behaves like one: the notice says an unfiled year "may delay your refund payment for the other year." A refund you are owed on a year you did file can be held because of a year you did not — which is how a dormant problem becomes an immediate one.

What happens if you do nothing

A CP518, and then a letter that does the computing.

The CP518 is the final reminder and it, too, prints no deadline. The letter after that one does — a CP2566, also called Letter 2566, which gives 30 days and contains the IRS's own proposed figure. After that comes a Notice of Deficiency with a 90-day window and a right that genuinely expires.

So the shape of this sequence is: a run of reminder letters with no response deadline, then two letters with real ones. You are inside the first run — the IRS also uses a CP515 in this series, so the exact number of reminders varies. That is a comfortable position to be in and an uncomfortable one to stay in, because the letters do not get less frequent while nothing happens.

Penalties are accruing on any tax that turns out to be due — the failure-to-file penalty at 5% of the unpaid tax per month or part of a month up to 25%, and the failure-to-pay penalty at 0.5% per month up to 25%. Where both apply to the same month the filing penalty is reduced by the payment penalty, so the combined figure is 5% a month rather than 5.5%.

And the unfiled year keeps blocking other things. The IRS's online payment plan application requires that you have "filed all required returns" — so an unfiled year prevents a self-service arrangement on a year you do owe, regardless of the amounts.

What to do

Step one, and it is the same as it was at the CP59 because nothing about the answer has changed: get the wage and income transcript for the year on this notice. It shows what was reported about you and it is most of what you need to file.

Get the wage and income transcript for the year on this notice.

It shows what was reported about you and it is most of what you need to file. Pull the transcripts for the year named and any other year you are unsure about.

How to get IRS transcripts without calling →

File the return — or, if you were not required to file, say so.

The notice carries instructions for both. For a reader below the filing threshold, or dealing with a deceased taxpayer's final year, the second route is the right one and filing a return is not.

If the return produces a refund, note whether the year is near expiry.

That is the only genuinely time-critical element anywhere in this sequence.

If it produces a balance you cannot pay, file it anyway and deal with the balance separately.

The two problems have different solutions and combining them is what stalls people.

Payment plans, and which one fits →

Check whether other years are in the same position.

The notice covers one, and non-filing is rarely confined to one.

Unfiled back tax returns →

What is harder than it looks here is nothing to do with the return. It is deciding what to do when the transcript does not add up to a full picture — a year with self-employment income, cash work, or a business that closed. The transcript shows what was reported to the IRS. It does not show what you actually earned, and where the two differ, filing a return that matches the transcript is not the same as filing a correct one. That is a judgment about your own records, and it is the point at which "just file it" stops being sufficient advice.

Two things worth reading next, depending on where this goes. Unfiled back tax returns covers what reconstructing a year involves in practice. And how to get IRS transcripts without calling is the practical first step this page keeps pointing at.

The Non-Filer's First 30 Days

Which transcript to pull, what each one shows, and what order to file in. At a CP516 the useful part is the reconstruction section — rebuilding a return from third-party records when your own are gone is the obstacle most people are actually stuck on, and it is more tractable than it looks.

A first name and an email address — a mailing list, said plainly. The figures on the sheet move and this is how corrections reach you.

Or call (800) 236-3741 and tell us what kind of year it was — a W-2, self-employment, a business that closed. That determines whether the transcript rebuilds your return or only starts it, which is the question this page ends on. No charge, no obligation.

The Kentucky note

Kentucky asks separately, and it does not necessarily ask at the same time. A federal non-filing sequence running on a year does not mean the state is running one, and it does not mean the state is not — the two systems match records independently.

The thing worth carrying across from this page is that the state's version of "we may determine your tax for you" arrives with a date attached, where yours does not. Kentucky's Notice of Tax Due carries a 60-day protest window under KRS 131.110, running from the date of the notice rather than from receipt, and the protest must be in writing. The Department of Revenue then says a 25% cost-of-collection fee may be added to unpaid tax 60 days after the original notice date, at a rate set by KRS 131.440(1)(a)1 — the 60-day trigger being the department's administrative practice rather than statutory text.

Nothing in the federal sequence you are in has a comparable fee, and nothing in it has a 60-day forfeiture. Kentucky's Notice of Tax Due covers the state side.

What we see

The second letter is where people usually decide, without quite deciding, that this is going to be a bigger job than they have time for. It very often is not.

And a thing worth saying, because people say the opposite to themselves: not having filed does not mean you have been hiding. Most of the years that end up on this desk went unfiled for ordinary reasons — a missing document that was going to be found, a return that needed a decision nobody wanted to make, a year that got away during something else. Filing late is a paperwork problem with a defined fix, and it is treated as one.

By the time a second letter arrives, most people have already had one argument with themselves about the first one and lost it. What we see is that the CP516 is the one that finally gets picked up, and what people are usually bracing for is months of hunting for paper they no longer have rather than anything to do with the tax. So the first thing we do is pull the wage and income transcript for the year, because it answers the question that is actually stopping them: what the IRS already has, and how much of the return is already sitting in it. A letter arriving twice does not mean anything has escalated, and nobody here needs to know why the year went unfiled. Starting is a transcript rather than a confession, which is a smaller first move than the second letter makes it feel.

Katherine — you are welcome to replace this with what you actually see at the second letter.

And if it is not one letter but a stack of them. Two codes, three years, a drawer that has been quietly filling up — that is a common shape for this and it does not need organizing before you ask. You do not have to open the rest, or know which years they cover. Read us the code off whichever one is on top: (800) 236-3741.

Katherine M. Johnson, CPA, CTRS

Katherine M. Johnson is a licensed CPA with over 30 years of experience and a Certified Tax Resolution Specialist (CTRS). She personally handles every case — representing individuals and businesses before the IRS and state revenue departments nationwide.

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Where this sits in the sequence

Notice	What it adds
CP59	First notice. No record of a return.
CP516▶ You are here	Second request. Adds "we may determine your tax for you." Still no deadline.
CP518	Final reminder. Still no deadline printed.
CP2566	The IRS's computation, with 30 days.
CP3219N	Notice of Deficiency. 90 days, and it is real.

See the full library →

Common questions

Is a CP516 more serious than a CP59?

Slightly, and not in the way people assume. It adds no deadline, no assessment and no penalty. What it adds is the IRS naming the process it will use if you do not file. The seriousness is in the direction of travel rather than in this letter.

Does "we may determine your tax for you" mean they will do my return?

They will compute a figure. That is not the same as doing your return: the computation uses only income reported by other people, no deductions you did not claim, no credits, and a filing status of single or married filing separately. It is built from less information than you have, and the things it cannot include — deductions, credits, a joint filing status — are the things that reduce a tax bill. What that is worth on your year depends on your year.

I filed that year. Why am I getting this?

Either it crossed in the mail — the IRS says to disregard the notice if you filed within the last eight weeks — or it was filed somewhere the IRS did not record, or it was filed for a different year or under a different name or number. Your account transcript for the year will show whether a return posted.

Can I just wait for them to work it out?

You can, and the arithmetic runs against you the whole time — including the refund date printed on the notice, which runs whatever else happens. The IRS's figure is built from third-party data; yours can include everything that reduces it. And an unfiled year blocks a payment plan on any other year, because the IRS's own online application requires all required returns to be filed.

How long do I have?

No date on this notice requires you to reply by it, so in that sense the answer is: there is no clock on responding. But the notice does print one date — the day by which a refund for that year has to be claimed — in the consequence list. Generally three years from the original due date, and it runs whether or not the IRS writes to you again. The IRS's next letter is what carries a response deadline.

What we cannot see from here — and it is not the transcript

The one question that decides whether you need anybody is whether your year is a simple one, and this page cannot tell you that.

A year with a W-2, maybe a 1099-INT, and nothing else is a straightforward late return — the transcript rebuilds it almost completely and there is genuinely nothing a CPA adds. If that is your year, file it and stop reading.

Here is where the transcript stops being the whole story:

Self-employment or cash income.

The transcript shows what was reported. If you had income nobody reported, filing to match the transcript is filing an incorrect return, and that is a worse position than not filing.

A business that closed, especially one that had employees.

There is a separate exposure there that has nothing to do with this notice and does not go away with the business.

Trust fund recovery penalty, explained →

Several years at once.

Where the order changes the outcome and one of them may carry an expiring refund.

A year with a property sale, a retirement distribution, or a debt cancellation.

All of which arrive on the transcript as gross figures with none of the basis or exclusions that make them less bad than they look.

A joint year where the other person is no longer around.

Through separation, death, or estrangement.

Innocent spouse relief →

If you are not sure which of those describes your year, that is a five-minute question rather than an engagement.

On what is actually stopping you, which is probably not the tax.

The call is confidential, and nothing about your account is touched because you made it. No CPA can contact the IRS about you, or file anything for you, without a signed authorization — so you can describe the year, find out whether it is the simple kind, and go away and do it yourself.

And there is a real office behind this, at 240 Blossom Park Drive, Suite 3, Georgetown, Kentucky, twenty minutes from Lexington. Not a call center.

Here: Katherine works the account herself and you are not handed to a case manager. The first thing that gets looked at is your transcripts, because nothing can be decided without them. And if your year is the simple one described above, that is what you are told on the first call.

The first call is free, it is thirty minutes, and there is no obligation at the end of it. All you need to say is what kind of year it was.

Call (800) 236-3741 Book a time →

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This page explains how IRS notices and the rules behind them generally work. It is not tax or legal advice about your situation, and reading it does not create a client relationship. Figures are current as of the last-reviewed date above.

The NLTR Office · Reviewed by Katherine M. Johnson, CPA, CTRS