Erroneous Notices from the IRS and States

Many clients have received CP59 Notices notifying them about missing Forms 1040 for the tax year 2019. In all cases we reviewed, the 2019 Forms 1040 were timely e-filed with proof of successful electronic transmission. The IRS has issued statements acknowledging these notices erroneously went out to some taxpayers. If the taxpayer has filed their 2019 tax return, they may disregard the letter and do not need to take any action.

The second type of notice being mistakenly generated is a Notice CP216F, used by the IRS to inform filers of Form 5500 (Annual Return/Report of Employee Benefit Plan) and Form 5500EZ (Annual Return of a One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan) that their extension forms (Form 5558) have been accepted. These notices are being issued to retirement plans with respect to their 2019 returns, which in most cases have already been filed. Though these superfluous notices should be retained by taxpayers as proof that the IRS received and approved of a plan’s extension request, no response is needed. The notice does not indicate that the IRS made any errors with respect to recording the plan’s extension form, its Form 5500, or its Form 5500EZ.

The California FTB sent out approximately 100,000 notices indicating that 2019 overpayments were not credited to 2020 as had been requested on the returns. According to the FTB, “this situation happens every year for current year payments that are made after the normal 4/15 filing due date. While the 2019 filing due date was postponed to 7/15, our system did not read the 7/15 payments as timely. Therefore, the payment amounts must be manually applied to the current tax year and the excess is transferred to the next year per the taxpayer’s request. Notices may be generated and sent out before the account is manually corrected.” If you received one of these notices, please let us know; however, it’s unlikely that any further action is necessary, as the FTB has already corrected these accounts. In fact, you can verify that the adjustment has been made via your account on MyFTB.

If you have questions, please contact your advisor at (805) 963-7811.