Notice CP259 - Estimated Tax Penalty

Type: Penalty Notice | Level: medium

IRC Section: IRC § 6654

Response Deadline: 60 days

The IRS is penalizing you for not paying enough tax during the year. If you're self-employed, have investment income, or didn't have enough withheld from your paychecks, you may owe an estimated tax penalty under IRC § 6654. This is a calculation — it's not a levy threat, but it does add to your balance.

A CP259 assesses an estimated tax penalty. The IRS is charging you a penalty for not paying enough tax during the year through withholding or estimated tax payments. This is a calculation notice — it tells you the penalty amount and adds it to your balance.

Common Triggers

• Insufficient estimated payments
• Self-employment income
• Investment income

Resolution Steps

1. Step 1: Review the penalty calculation
2. Step 2: Check if you qualify for penalty abatement
3. Step 3: Contact us to discuss exception options
4. Step 4: Set up estimated payments for next year
5. Step 5: Consider adjusting W-4 withholding

Common Questions About CP259

How is the estimated tax penalty calculated?

The penalty is calculated under IRC § 6654 and is based on the amount of underpayment, the period it remained unpaid, and the IRS quarterly interest rate. It compounds quarterly.

Can I get the estimated tax penalty removed?

You may qualify for a waiver if you meet certain exceptions: your total tax was less than $1,000, you had no tax liability the prior year, or you met the safe harbor (paid 90% of current year or 100% of prior year tax). A practitioner can help determine if you qualify.

Related Notices

• Notice CP14
• Notice CP71C

Additional Resources