IRS Notice LT16: Unfiled Tax Returns Notice

IRS Letter LT16 notifies you that the IRS has identified one or more years for which you have not filed a tax return and demands that you file those returns immediately.

What LT16 Means

LT16 is issued when the IRS’s records — gathered from W-2s, 1099s, and other third-party information returns — indicate that you had taxable income in a given year but never filed a tax return. The IRS is warning you that if you don’t file, it will prepare a return on your behalf called a Substitute for Return (SFR).

An SFR uses only the income data the IRS has on file. It does not apply deductions, credits, or filing statuses that benefit you. The result is almost always a larger tax bill than what you would owe if you filed yourself. Once the IRS assesses an SFR, it then becomes a collectible balance that triggers the full collection process — liens, levies, and garnishments.

Why You Received This Notice

You received LT16 because:

• The IRS matched income information from employers, clients, or financial institutions to your Social Security number but found no corresponding return filed
• You may have had a life event (illness, job loss, overseas living) that caused you to miss filing deadlines
• You may have believed you didn’t owe anything and therefore didn’t need to file — but filing is required regardless of whether you owe

Key Deadline and Consequences of Ignoring

There is no fixed deadline printed on LT16, but the IRS typically proceeds to an SFR assessment within 30 to 90 days of sending this notice. If you ignore LT16:

• The IRS files an SFR, creating a tax liability without your deductions or credits
• The failure-to-file penalty (5% per month, up to 25%) accrues on the SFR balance
• The failure-to-pay penalty (0.5% per month) and interest also accrue
• A Notice of Federal Tax Lien can be filed once the SFR is assessed and collection begins
• In rare cases, repeated non-filing can lead to criminal referral

What to Do — Step by Step

1. File every missing return as quickly as possible. Filing — even late — is almost always better than having the IRS file an SFR for you.
2. Gather your income records. Request IRS wage and income transcripts at IRS.gov/transcripts to see what third-party income data the IRS already has. This helps you file accurately.
3. Claim every deduction and credit you are entitled to. Unlike an SFR, your self-prepared return can include business expenses, student loan interest, retirement contributions, and other deductions that reduce your liability.
4. Don’t wait until you can pay. File immediately, even if you can’t pay the resulting balance. Non-filing penalties are far harsher than non-payment penalties. You can address the balance separately.
5. Explore resolution options for the resulting balance. Installment agreements, Offer in Compromise, or Currently Not Collectible status are all available once you are filing-compliant.
6. Work with a tax professional if you have multiple unfiled years or complex income. An enrolled agent or CPA can reconstruct your records and file all missing returns efficiently.

Your Rights

You have the right to:

• File your own return rather than have the IRS file an SFR
• Challenge an SFR assessment if one has already been issued
• Claim all deductions and credits you are entitled to on late-filed returns
• Request penalty abatement for reasonable cause if circumstances prevented timely filing
• Seek help from the Taxpayer Advocate Service if you’re experiencing IRS hardship

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