IRS Mailing Erroneous CP259F Notices

We prepare a few split-interest charitable trust returns (IRS Form 5227) every year. Coincidentally, I serve as trustee of a split-interest trust. Imagine my surprise when I received a CP259F Notice from the IRS for the trust that I am trustee of stating, “You didn’t file a Form 5227.” The only problem is that I did file it (mailing it certified mail, return receipt requested) and it shows as delivered on March 4th. (Form 5227 cannot be electronically filed.) Meanwhile, multiple clients received the same letter; all filed their returns on or about the same date (and have proof of filing).

I called the IRS this morning and confirmed that these returns are most likely sitting in a trailer in Ogden, Utah waiting to be processed. Because of Covid, the Ogden, Utah mailroom did not reopen until mid-June. It could be tomorrow or three months from tomorrow before the Form 5227s are processed. The IRS asked that we ignore these notices and not send a second return because a second return (a) could be processed before the first return (causing another set of issues, including erroneous late filing penalties), and (b) sooner or later the backlog will be cleared (the returns will be considered filed on the date received, not the date the IRS eventually processes the returns). The IRS representative I spoke with stated these notices should not have gone out.

I do want to point out that this issue shows why using certified mail is essential when sending anything to a tax agency. While I’m hopeful that the trust return is sitting in the trailer and will eventually be filed, it’s inevitable that something is going to get lost. (There were over 23 million pieces of mail waiting to be processed at one point; the backlog is still more than 5 million.) Should the IRS lose the Form 5227, I have proof of filing that should hold up and prevent the imposition of late filing penalties.

This also is definitely the year to have patience with the IRS.

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