What a CP518 is
A CP518 is the IRS's last reminder before it computes the year itself. The IRS calls it a final reminder on its website — "This is your final reminder; we still don't have a record that you filed your prior year tax returns" — and the business page says the same.
The letter itself does not use the word. We checked both specimens: neither contains "final" anywhere. And the individual CP518 letter is word-for-word the CP516 letter — same headline, same opening paragraph, same four-bullet consequence list.
That is worth knowing, because it answers the question you are probably asking. Has this escalated? In the document, no — nothing in it has changed. What has changed is its position: the reminders have run out, and the next letter does not ask. It states a figure and gives you 30 days.
No assessment, no amount, and no deadline for replying. One date is printed on the individual version — the day by which a refund for that year must be claimed.
If your notice shows a Social Security number and Form 1040
This is the individual version, and it is the CP516 with one more letter behind it.
The consequence list on the specimen, in full:
"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."
Three things follow from that, in order of how much they cost you.
Your refund for that year expires, and your notice prints the date. Generally three years from the original due date — the clock started without you because tax withheld from wages counts as paid on that original due date, under IRC 6513(b)(1) — and once it closes nobody has the authority to release the money. That is the one deadline in this whole sequence and it runs against you.
A refund on a different year can be held because of this one. People discover this when a return they did file produces nothing.
And the tax the IRS eventually computes will be higher than the tax you would compute, because its figure is built only from what other people reported — no deductions you did not claim, no credits, filing status set to single or married filing separately.
The action is the same as it was two letters ago: pull the wage and income transcript for the year, and file the return — or, if you were not required to file that year, tell the IRS so using the instructions on your notice. Nothing is gained by waiting for the next letter.
If your notice shows an Employer ID number and a business form
This is the business version, and the reason it needs separate treatment is not on the notice.
The specimen's headline is "Message about your Form 940 / You didn't file your tax return," and it carries a table headed "Summary of unfiled returns" — which is itself the first difference: a business CP518 commonly names several periods at once, where the individual version names a year.
The consequence list is shorter and the missing item is telling. The business version drops the refund-expiry line, because a business filing a payroll return is not usually in a refund position. What remains is "We may determine your tax for you" and the penalty accrual.
Here is what the notice does not say, and it is the most important thing on this page.
Unfiled payroll returns are not only a company problem. Where a business withholds tax from employees' wages and does not pay it over, the IRS can assess the full amount of that withheld trust-fund tax personally — not a share of it — against a person who was responsible for collecting, accounting for and paying it and who willfully failed to do so. That is the Trust Fund Recovery Penalty.
Both halves of that test matter and the second is the one people are not told about. "Responsible" turns on authority and duty rather than job title. "Willfully" is a separate requirement, and it is the principal defense — it asks what the person knew and what they chose to do with the money instead.
It survives the closure of the business, and it arrives on a different letter entirely — a Letter 1153, which carries 60 days from the date of the letter proposing the assessment to appeal, or 75 days if that letter is addressed to you outside the United States.
Nothing on your CP518 mentions any of that, and the sequence that leads to it starts with returns not being filed.
So for a business CP518, the filing question and the payroll question are not the same question, and the second one is usually the larger. If the unfiled returns are 940s or 941s and the money was withheld from employees, that is the thing to get advice about — and it is more urgent than the notice in your hand suggests.
Sources: IRS Notice CP518 individual and business specimens, irs.gov, both read 6 September 2026. IRS, "Understanding your CP518 notice" and "Understanding Your CP518 Business notice," reviewed 6 September 2026. IRS, "Employment taxes and the Trust Fund Recovery Penalty," reviewed 25 August 2026.
Your clock
Nothing on a CP518 requires you to reply by a date, in either version. The individual letter does print one date — the day by which a refund for that year must be claimed — and the business version, which is not usually a refund situation, does not carry that line.
The IRS's pages give inbound windows for post crossing rather than deadlines. The individual page says you need do nothing if you filed within the last eight weeks. The business page says the same eight weeks in its FAQ, and separately says a return filed in the last four weeks under the same name and EIN can be disregarded. Those are windows for ignoring the letter, not for answering it.
What has a date is the next letter. A CP2566 — which the IRS's internal manual calls Letter 2566, the "30-Day Letter" — gives 30 days from the date of the letter, and after that the sequence produces a Notice of Deficiency with a 90-day window and a right that genuinely expires.
And an unfiled year blocks arrangements on other years. The IRS's online payment plan application requires that you have "filed all required returns" — so this notice is capable of preventing a self-service solution to a completely different problem.
What happens if you do nothing
A CP2566, then a CP3219N, then an assessment.
The step worth understanding now is what the IRS's own return does to your position, because it is counterintuitive:
A return the IRS prepares for you does not start your clocks. Under IRC 6020(b) the IRS may make a return where a person has not, and 6020(b)(2) says such a return is "prima facie good and sufficient for all legal purposes." Read alone, that sounds like the matter is closed.
It is not, and the next section of the Code says so expressly. IRC 6501(b)(3):
"Notwithstanding the provisions of paragraph (2) of section 6020(b), the execution of a return by the Secretary pursuant to the authority conferred by such section shall not start the running of the period of limitations on assessment and collection."
So an IRS-prepared return gives you the worst of both. The tax is assessed and collectible. Your own limitation periods still have not begun. Filing your own return is what starts them, and it is the same act this notice is asking for.
What to do
Step one, and it takes as long as reading the top of the page: confirm which version you have, from the identifier field. Everything below branches on it.
If it is the individual version:
Pull the wage and income transcript for the year, and the account transcript to confirm nothing posted.
The wage and income transcript shows what employers, banks and other payers reported about you — the raw material for rebuilding a return when your own records are gone.
File the return.
Filing your own return is what starts the limitation clocks that help you. Waiting for the IRS to compute the year does not.
If it produces a refund, check how close that year is to expiring.
This is the one deadline that matters and it is yours. The notice prints the date in the consequence section.
If it produces a balance, file it anyway and treat the payment as a separate problem with its own solutions.
The penalty for not filing runs at many times the rate of the penalty for not paying. A balance has options; a missing return has one.
If it is the business version:
Establish which periods and which forms are actually missing.
The notice's own table is the starting point, and it is worth confirming against the account rather than assuming it is complete.
Work out whether payroll tax was withheld and not paid over.
If it was, that is the priority and it outranks the filing question — and note it is the withheld trust-fund portion that carries the personal exposure, not the whole payroll liability.
File the returns.
Unfiled payroll returns get worse in a way individual returns do not, because the personal exposure crystallizes through a separate process that filing does not by itself trigger — but not filing does not delay either.
Get advice before an interview, not after.
If a revenue officer becomes involved and proposes a Form 4180 interview, that is the point at which personal liability is being decided.
What is harder than it looks on this notice is the business half, and specifically the question of who is responsible. "Responsible person" is not the same as owner, director or signatory — it turns on who had the authority and duty to collect and pay the tax, and it can reach a bookkeeper and miss a shareholder. It is decided on facts about how the business actually ran, which is why it is argued rather than looked up.
Two things worth reading next, depending on where this goes. Unfiled back tax returns covers the work on both the individual and the business side. And what happens when the IRS files a substitute for return covers the concept these notices describe without naming.
