Understanding IRS Notice CP215: Causes and Responses

Receiving an IRS notice can be a source of concern, but with the right information and support, it can be managed effectively. This article delves into the details of IRS Notice CP215, explains its causes and outlines proper responses.

What Is IRS Notice CP215?

IRS Notice CP215, also known as the “Notice of Fiduciary Income Tax Due,” serves as a notification from the IRS about an outstanding tax balance. This notice alerts you to unpaid taxes on the income generated by an estate or trust.

Common Causes of IRS Notice CP215

• Failure To File: US taxpayers with international business or investment activities often unintendedly miss the filing of Form 5471, 5472, 8858, 8621, 926, 941 and this is what causes the CP215 notice.
• Underreporting: Incorrect or incomplete reporting of Form 941, Employer’s Quarterly Federal Tax Form, can lead to disparities between the reported amount and the actual amount, prompting the issuance of IRS Notice CP215.
• Calculation Errors: Mistakes in calculations, deductions, or other tax-related elements on Form 941 can trigger an inaccurate assessment of your tax liability, resulting in an IRS notice.
• Late or Missed Payments: Failure to make required tax payments or neglecting to pay the tax balance by the deadline can trigger the issuance of a CP215 notice.
• Missing Schedules and Documentation: Omitting necessary schedules and documentation, particularly those related to Form 5471 and 5472, can lead to the issuance of an IRS notice.

Responding Strategically to IRS Notice CP215

• Thorough Review: Carefully examine the CP215 notice to grasp the specific tax issues identified. Understand the tax deficiency and the corresponding amounts involved.
• Comparative Analysis: Compare the notice’s details with your information. Identify discrepancies, errors, or omissions that may have led to the IRS notice.
• Correct Omission: In cases where the required forms were not filed, you may need to file those forms within a certain timeframe listed on the notice to avoid any further penalties or interest.
• Formal Response: Draft a formal response letter to the IRS, potentially with the actual filing of the forms that were previously missed, and outlining the reasonable cause.
• Timely Submission: Mail your response to the IRS address provided before the deadline on the CP215 notice to avoid additional penalties.

Reasonable Cause

Reasonable Cause is a provision by the IRS that allows taxpayers to request the abatement (reduction or removal) of certain penalties that were assessed due to failure to comply with tax obligations, such as issues listed on CP215.

To qualify for penalty abatement under the Reasonable Cause criteria, the taxpayer needs to prove that their failure to meet the tax obligations was due to circumstances beyond their control and that they acted in a responsible manner under the circumstances. Common examples include:

• Natural Disasters: If a taxpayer’s records or payments were destroyed in a natural disaster, preventing them from meeting their tax obligations.
• Serious Illness or Death: If the taxpayer, their spouse, or a close family member experienced a severe illness or death that directly impacted their ability to comply with tax requirements.
• Unavoidable Absence: If the taxpayer was unable to meet their tax obligations due to an unavoidable absence, such as being abroad during the tax filing deadline.
• Fire, Theft, or Other Casualty: If important tax records were destroyed in a fire, stolen, or lost due to another casualty.
• Civil Unrest or Terrorism: If the taxpayer was unable to meet their obligations due to disruptions caused by civil unrest or acts of terrorism.
• Incorrect IRS Advice: If the taxpayer can prove they relied on incorrect advice given by the IRS.
• Mail Issues: If the taxpayer can prove that their tax documents were lost in the mail through no fault of their own.

Reach Out Today

Facing IRS Notice CP215 requires a proactive and informed approach. By understanding the potential causes, responding strategically, and enlisting the specialized services of Dimov Tax, you can navigate this process with confidence. Our team of experienced CPAs and EAs is here to ensure your compliance and ease your concerns during this challenging time. Contact us below to discuss how we can assist you in effectively addressing IRS Notice CP215.