Opening your mail and seeing “We show no record of your tax return” from the IRS is never fun—especially when you’re already behind on payroll or corporate filings. That’s exactly what IRS Notice CP259 is: a formal reminder that the IRS believes your business skipped a required return and that inaction can lead to much bigger problems.
This guide explains what IRS Notice CP259 means, how it fits into the IRS collection process, and the practical steps you can take to get back into compliance before the IRS files a return for you.
What Is IRS Notice CP259?
IRS Notice CP259 is a return delinquency notice. It’s sent when the IRS’s Business Master File shows that your company was required to file a specific business return, but no filing was received for that period.
Common forms that can trigger a CP259 include:
- Form 1120 – U.S. Corporation Income Tax Return
- Form 1120-S – U.S. Income Tax Return for an S Corporation
- Form 940 – Employer’s Annual Federal Unemployment (FUTA) Tax Return
- Form 941 – Employer’s Quarterly Federal Tax Return
CP259 notices are period-specific. If the IRS believes you missed multiple returns or periods, you may receive more than one notice.
Why Your Business Received IRS Notice CP259
The IRS sends CP259 when:
- It expected a business return for a specific period (based on your EIN and filing history),
- No return was posted to your account, and
- Enough time has passed that they consider the return delinquent.
This can happen because:
- You truly didn’t file the return.
- You filed late and the return hasn’t been processed yet.
- Your filing requirement changed (for example, you stopped having employees) but IRS records weren’t updated.
- Your business closed, and no one formally notified the IRS.
Whatever the reason, CP259 is the IRS’s way of saying:
“We think you owe us a return. Either file it or tell us why you don’t need to.”
If you ignore the notice, the IRS may eventually prepare a Substitute for Return (SFR) on your behalf, often using limited information and assumptions that are not in your favor.
IRS Notice CP259 Explained, Section by Section
The exact wording can vary slightly by form and tax period, but most CP259 notices follow a similar structure.
1. “Why You’re Getting This Notice” – Missing Return
The first section identifies:
- The form number the IRS expected (for example, Form 941), and
- The tax period they show as unfiled.
It’s basically the IRS saying: “Our records show no return for this specific form and period.”
For payroll forms like Form 941, this often means they think you had employees or wages during that quarter and you didn’t report them.
2. “What You Need To Do Immediately” – File or Respond
Next, the IRS explains what it wants you to do:
- If you’re required to file:
File the missing return right away, following the instructions on the notice. There’s typically a response window (often about 30 days from the notice date—check your specific letter) before the IRS escalates penalties or moves toward an SFR assessment. - If you don’t think you need to file:
You can dispute the filing requirement by:- Completing the enclosed Response Form, or
- Calling the phone number on the notice to explain why a return isn’t required.
Either way, silence is treated as agreement that a return is due.
3. “If We Don’t Hear From You” – Substitute for Return Risk
There’s usually a section that warns what happens if you ignore the notice:
- The IRS may prepare a Substitute for Return (SFR) based on the information it has (like 1099s, W-2s, or prior filings).
- You can then be billed for tax, penalties, and interest based on that IRS-prepared return.
SFRs almost never include:
- All your legitimate deductions,
- Correct classification of workers or expenses, or
- Accurate business losses.
That’s why getting your own accurate return on file is so important.
4. “Additional Information” – IRS Web Links and Help
Most CP259 notices include:
- A link to the official “Understanding Your CP259 Notice” page on IRS.gov.
- A general phone number for business tax questions.
- References to other IRS resources and publications for forms, instructions, and filing requirements.
These pages can be useful, but they don’t replace tailored advice—especially if your payroll or entity structure has changed.
5. Response Form – Explaining Why No Return Is Needed
If you believe no return is required for the period, the CP259 usually includes a Response Form with checkboxes such as:
- Business closed (with date operations ceased).
- No employees and no wages paid during the period.
- All wages were reported on another form (for example, Form 943 or 944), often requiring you to attach a copy.
You can also explain “another reason” in the space provided and attach supporting documentation.
Be sure to sign and date the form—there’s a perjury statement at the bottom, so treat it as seriously as a tax return.
6. Credits, Deposits, and Refunds – Why Filing Still Matters
Many owners assume: “If there was no activity, I’ll just ignore it.” That can be costly.
The notice usually explains that to:
- Claim a refund or apply credits, you still must file a return within specific time limits (generally three years from the due date or two years from payment, whichever is later).
If you made payroll deposits or other payments for that period, filing is what allows you to match those credits to a return and avoid losing them.
What To Do If You Receive IRS Notice CP259
Here’s a practical step-by-step path to follow.
Step 1: Verify What the IRS Thinks Is Missing
Start by confirming:
- Which form is listed (1120, 1120-S, 941, 940, etc.), and
- The exact tax period the IRS shows as delinquent.
Then compare that to your own records:
- Did you file that return?
- If so, when and how (e-file, mail, paid preparer)?
- Do you have a copy or e-file confirmation?
If you filed within the last few weeks, it may simply not have posted yet—but you still need to document that.
Step 2: Decide Whether a Return Is Required
Ask:
- Did the business operate during that period?
- Were there employees or wages subject to payroll tax?
- Did the entity have income, deductions, or transactions that require a return?
If a return is required, treat CP259 as your chance to fix the problem before the IRS drafts one for you.
If a return is not required (for example, you had no employees and no wages, or the entity was properly closed), you should:
- Complete the Response Form explaining why, and/or
- Call the IRS using the number on the notice to clarify your filing requirement.
Step 3: File Any Missing Returns Quickly and Accurately
If you determine that a return is due:
- Prepare an accurate return for the period.
- Include all applicable income, deductions, and credits.
- Make sure payroll records, W-2s, and deposits reconcile to what you report.
You generally want your return filed before the IRS prepares an SFR, not after—they’re much more willing to work from your numbers than to unwind an existing IRS-created assessment.
Step 4: Address Any Tax Due and Penalties
Once the return is on file, you may discover:
- A balance due (tax, penalties, and interest),
- A smaller liability than the IRS might have assumed, or
- A refund or credit.
If there is a balance:
- Pay in full if possible to stop further interest and penalties.
- If you can’t, consider:
- Installment agreements (payment plans),
- First-time penalty abatement or other penalty relief, and
- Longer-term resolution options if cash flow is tight.
Step 5: Fix the Underlying Systems
A CP259 notice is often a symptom of operational issues:
- Payroll not being filed on time
- Entity changes not communicated to the IRS
- Bookkeeping gaps or staff turnover
Once you’ve filed the missing return, it’s worth asking: “What broke in our process that let this happen?” Fixing that now is far cheaper than repeated penalties later.
Why Many “Tax Relief” Firms Don’t Go Far Enough on CP259 Issues
When a CP259 notice arrives, some business owners turn to national “tax relief” companies. For straightforward individual issues those firms may be able to help with phone calls and forms—but for business non-filers, that’s rarely enough. You need a CPA Firm.
Common limitations we see:
- They focus on phone calls, not root causes.
Many relief firms concentrate on calling the IRS and asking about balances or payment plans. They often don’t roll up their sleeves to rebuild payroll records, reconcile deposits, or reconstruct missing books. - They may not repair your filing history.
If the real problem is multiple unfiled 941s, 940s, or 1120s, you need correct returns prepared and filed—not just a conversation with the IRS about what their system currently shows. - Complex structures overwhelm call-center models.
Businesses with multiple entities, prior mergers, third-party payroll providers, or trust fund issues require careful technical work. That’s outside the scope of many high-volume relief shops. - Long-term compliance often gets ignored.
Even if a firm helps you get through this one notice, they may not help you redesign your accounting and payroll systems so you don’t end up with the same problem next quarter.
Real resolution is about more than calming today’s letter. It’s about making sure your returns are correct, your filings stay current, and your business isn’t always one missed deadline away from the next crisis.
How Corridor Consulting Helps With IRS Notice CP259
At Corridor Consulting, we treat a CP259 as a warning light—not just a one-off annoyance.
Our process for business clients typically includes:
- Clarify what the IRS sees.
We review the notice, pull IRS transcripts, and map out exactly which forms and periods are in question. - Rebuild the missing returns the right way.
We help reconstruct payroll and financial records so that Form 941, 940, 1120, or 1120-S filings are accurate and defensible—not rushed “just to get something in.” - Evaluate penalties and relief options.
Where appropriate, we explore penalty abatement, payment plans, or other tax resolution tools that make sense for your situation. - Design systems so this doesn’t happen again.
For ongoing clients, we integrate your payroll, bookkeeping, and tax calendar into a consistent process—often through our 90-Day Pathway to Prosperity™ onboarding—so your filings stay timely and you’re not living in fear of the next IRS notice.
Key Takeaways
- IRS Notice CP259 means the IRS believes your business failed to file a required tax return for a specific period.
- If you ignore it, the IRS can file a Substitute for Return and assess tax, penalties, and interest based on incomplete information.
- Your first priorities are to:
- Confirm whether a return is truly required,
- File any missing returns quickly and accurately, and
- Address any balance due with a realistic plan.
- For businesses, CP259 is often a sign that systems—not just forms—need attention. Professional help can save both time and long-term cost.
Take the First Step to Resolve IRS Notice CP259
If you’ve received IRS Notice CP259—or know your business has unfiled returns:
Complete our Discovery Chat Questionnaire to begin your complimentary consultation.
During this initial conversation, we’ll discuss your situation, answer your questions, and determine whether a full Case Evaluation is appropriate.
If you choose to move forward with a Case Evaluation, our team will pull and analyze your IRS transcripts, confirm what returns are missing or misreported, identify possible errors, and outline the resolution strategies available to you.
This keeps you fully informed before deciding how to proceed—without committing to any services upfront.
Additional IRS Resources for IRS Notice CP259
For more background directly from the IRS:
