CP16 Notice: Tax Return Error and Refund Seized

CP16 Notice: Tax Return Error and Refund Seized

Occasionally people will make mistakes when filing their tax returns. While it’s rare that an actual human will review your tax return nowadays, the automated review programs have gotten pretty good at catching common errors. If you make an error on your tax return and owe back taxes to the IRS, you can expect to receive a CP16 Notice from the IRS.

What is a CP16 Notice?

If you are CP16 Notice from the IRS, it means that the IRS has found a discrepancy on your tax return. The two criteria for receiving a CP16 Notice include:

  • There’s a miscalculation or other error on your tax return resulting in a refund or a higher refund AND
  • The IRS will be applying part of that refund or the entire refund to an outstanding tax debt

Note that both criteria must be met in order to receive a CP16 notice. For example, you’ll receive a CP11 notice if the IRS made a correction and you owe money for the current tax year.

What Information is on a CP16 Notice?

A CP16 notice includes all of the information regarding the changes to your tax situation, including:

  • Next steps
  • Changes made to your tax return
  • Changes made to your tax calculations
  • Changes made to your payments and credits

Sometimes the explanation of the changes can be vague. Therefore, the Notice also provides a contact number in case you need to discuss the Notice with someone at the IRS.

What Should I Do If I Receive a CP16 Notice?

Your next actions depend on if you agree with the information provided in the CP16 Notice. The IRS makes mistakes, so it’s essential to review and verify the information.

If You Agree with the CP16 Notice

If you’ve verified that the information on the CP16 Notice is accurate, then you don’t need to take any further action. You will not be receiving a refund check, and as long as the refund would cover your owed tax debt, you don’t owe the IRS anything either.

You should keep the Notice with your tax records and apply the changes to your tax return. That way, in case the issue arises again, or you need to reference your taxes for that given year, you have the information available.

If You Disagree with the CP16 Notice

If you’ve reviewed the CP16 Notice and disagree with the information provided, then you should contact the IRS as soon as possible. An IRS representative will walk you through the changes and let you know what documentation needs to be provided in order to dispute the charges.

Unfortunately, there is no one-size-fits-all solution for the documentation you need to provide to the IRS. What is required will depend on the changes that were made to your tax return. However, in all instances, the documentation must be submitted within 60 days of the date of the CP16.

In this instance, it’s extremely important to get in touch with us. Providing the wrong information could not only result in failing to dispute the Notice, but it could also lead to a full-blown audit.

Do I Owe the IRS Money if I Receive a CP16 Notice?

If you receive a CP16 notice, you don’t necessarily owe the IRS money. If the revision to your return results in your refund covering your entire tax debt, then you don’t owe money.

However, if the newly calculated refund does not cover your previous years’ tax debt, you still owe the remaining debt to the IRS. If you are unable to pay the balance in full, check out your tax debt relief options.

How Do I Find Information on My Back Taxes?

Your CP16 Notice will list any owed back taxes by tax year. However, you should have received several notices notifying you of owed taxes, like a CP501, prior to receiving the CP16.

Will I Still Get a CP16 If I’m on a Payment Plan?

Unfortunately, even if you’ve settled on a payback agreement with the IRS, they still can levy a tax return to apply towards your outstanding tax debt. The good news is that the refund that you would’ve received will be applied to your outstanding debt.

Can I Still Get a Refund if I Receive a CP16 Notice?

Yes! If you’re newly calculated refund exceeds the tax debt owed from previous years, then you will still receive a refund for the difference between your debt and the tax credits received. It’s kind of like the real-life version of the bank error in your favor Monopoly card.

How Can I Avoid Making Mistakes on My Tax Return?

The best way to avoid receiving a C16 notice from the IRS is by completing your tax return accurately. As long as you have all the documentation needed to accurately file your taxes, the best way to avoid making an error on your tax return is by using a verified e-file provider like e.file.tax.net. This helps ensure that you aren’t making errors in your calculations or entering things on the wrong lines.

How Can IRS Shield Help?

The IRS does make mistakes. If you feel that the information on a C16 notice is inaccurate, you should seek assistance. Contact us today to learn more about how we can help you get the tax refund that you deserve, even after receiving a C16 notice.