The ASFR 30-Day Letter: What a CP2566 Means for a Non-Filer

The envelope says the IRS did not receive your return. Inside is a calculation of tax, penalty, and interest for a year you never filed. The number is large. The deadline is short.

That letter is the 30-day letter from the IRS's Automated Substitute for Return program. The IRS's public notice page calls it the CP2566. The Internal Revenue Manual calls it Letter 2566. Either way, it is the moment when fixing an unfiled year is cheapest and easiest. After this, it gets harder.

What the ASFR program is

IRM 5.18.1 governs the Automated Substitute for Return program. It describes ASFR as "a Nonfiler enforcement tool used by Collection to address modules where returns were requested, but not filed by taxpayers." Its stated goal is "to secure delinquent tax returns if possible, and create substitutes for return when filed returns are not received."

The manual explains that ASFR determines and assesses tax by either securing valid returns from taxpayers or "computing tax, penalties, and interest based on Information Reporting Program (IRP) information submitted by payers, combined with other internally available information."

Cases come to ASFR from the taxpayer delinquency investigation inventory, or as referrals from the Automated Collection System and field collection. By the time you get the 30-day letter, you have usually already missed one or more earlier requests to file.

What the 30-day letter says

The IRS's page on the CP2566 sums it up: "We didn't receive your tax return, so we calculated your tax, penalty and interest." The figures are based on income reported by employers, banks, and others.

That calculation follows the substitute for return rules: reported income in full, the standard deduction, no itemized deductions, no credits, and business expenses only if the IRS has your documentation. We break those rules down in how the IRS builds a substitute for return.

According to IRM 5.18.1, the letter gives the taxpayer 30 days to respond, and the system holds the case in suspense for a period after the letter date to allow time for a response. If you have a power of attorney on file with ASFR, a duplicate letter goes to your representative. A version called Letter 2566R is sent when there is a refund hold indicator on the account.

Your response options

The IRS notice page gives two main options.

Option one: file your own return

This is almost always the right answer. Your return can include deductions, credits, business expenses, and filing status that the IRS calculation leaves out. The IRS page notes you can e-file through a provider if the return is from the past two years; otherwise, mail it with the response form included with the notice.

Option two: accept the proposed amount

You can sign and return the response form agreeing to the IRS figures and then pay or arrange payment. I rarely see a case where accepting the ASFR number is better than filing a correct return. The ASFR number is built to be complete on income and minimal on everything else.

If you already filed

The IRS page says you do not need to act if you filed within the last eight weeks. If it has been longer, send a signed copy of the return, making sure the name, taxpayer ID, and tax year match the notice. If it is a joint return, both spouses sign.

If you were not required to file

Call the number on the notice. Have your reasons ready, such as income below the filing threshold for that year.

What happens if you do nothing

If the 30-day suspense period ends with no response, or an insufficient one, ASFR runs another check and then generates a statutory notice of deficiency, sent by certified mail (IRM 5.18.1). That is the 90-day letter, known publicly as the CP3219N.

Here is the critical point. The ASFR manual tells IRS employees that if a 90-day letter has not been issued, they can explain the taxpayer has additional time up to the follow-up date. But "if a 90-Day Letter has been issued, explain an extension cannot be granted once the 90-Day Letter has been issued." The time to ask for breathing room is during the 30-day letter, not after.

The 90-day letter and your Tax Court rights are covered in the CP3219N 90-day letter.

A 30-day letter response checklist

• Note the tax year and the response date printed on the notice.
• Pull your wage and income transcript for that year so you see exactly what the IRS used.
• Compare the IRS income to your records. Look for duplicate, misattributed, or gross-versus-net amounts.
• Gather expense records, especially for self-employment income.
• Decide filing status. Married couples need both signatures for a joint return.
• Prepare and sign an accurate return for that year.
• Mail it with the response form in the envelope provided, or e-file if eligible.
• Keep proof of mailing and a complete copy.
• Check whether other years are also unfiled. ASFR letters often come one year at a time.

Why the 30-day letter matters more than people think

At the 30-day stage, nothing has been assessed yet. Your return replaces the proposed numbers before they hit your account. Once the assessment posts, fixing it becomes a reconsideration after the fact, which takes longer, and collection can proceed on the assessed balance in the meantime.

The 30-day letter is also usually about one year. The IRS sends them as individual modules work through the system. If you have several unfiled years, more letters are likely coming. This is the moment to look at the whole picture. See how many years of unfiled returns to file.

Reading the numbers on the letter

The 30-day letter includes the IRS's tax computation and an explanation sheet. Read it line by line against your own records. The ASFR manual says the program calculates tax, penalties, and interest systemically on every proposed assessment, so the figures are only as good as the information the computer had.

Look for three things in particular. First, income that is not yours, such as a 1099 issued under your number for an account you closed or a business you sold. Second, income counted at the gross amount when part of it was a return of your own money, such as proceeds from a sale where you had basis. Third, income that was already reported somewhere else, such as on a business return or a spouse's return. The ASFR manual recognizes that taxpayers respond with these kinds of issues and has procedures for income previously reported and for joint returns filed under another taxpayer number.

Every one of those errors gets fixed the same way: your return reports the correct numbers, with an explanation where the difference is not obvious.

What if you cannot afford to pay?

Filing and paying are separate problems. File the return anyway. A return that shows a balance you cannot pay is far better than an ASFR assessment you cannot pay, because the filed return is accurate and puts you in filing compliance. Payment options like installment agreements generally require filing compliance first under IRM 5.14.1.4.2.

Common mistakes

Calling the IRS without a plan. The ASFR phone line can explain the letter and give you income information, but it cannot fix a missing return. Only a return fixes a missing return.

Filing a rushed return. A fast, inaccurate return creates new problems. If you need more time to assemble records, act before the 90-day letter issues, when more time is still possible.

Ignoring the other spouse. ASFR can work spouses separately. If you intend to file jointly, both spouses need to sign, and both accounts need attention.

Treating the letter as a bill. It is a proposal. It becomes a bill only if you let it.