CP12 Notice: Refund of Overpaid Taxes

While most people fear receiving mail from the IRS, the CP12 notice is one that you probably shouldn’t fear! This notice means that you can expect a check from the Federal Government in your mailbox in the next couple of weeks (or an adjustment to your original refund amount).

That’s right – while a CP12 notice does mean there was a math error on your return, this error likely resulted in the IRS owing you money.

Keep reading to learn how the CP12 notice works and what you should do if you get one. (If you have questions, IRS Shield is always here to help.)

What is a CP12 Notice?

A CP12 notice is one of the few types of IRS notices that you shouldn’t be upset about seeing in your mailbox. This notice informs you that the IRS has automatically adjusted one or more errors on your tax return (generally in your favor). As a result, you may be receiving a larger tax refund or a refund due to overpayment of your initial taxes.

In short, a CP12 notice generally means that you’ll be receiving a check in the mail from the IRS within 4 to 6 weeks!

What is on a CP12 Notice?

A CP12 notice is usually straight forward and provides you with the information you need to know about why your tax return is being changed and how much money you can expect to receive from the IRS.

The CP12 notice may include the following:

  • Summary – includes the adjusted refund you’ll be receiving, a high-level calculation of that summary, and the forms and areas of those forms that have been automatically adjusted.
  • What you need to do – instructions on the next steps that you’ll need to take
  • Changes to your tax return – a detailed listing of all the changes made to your tax return, including lines that were changed, why they were changed, and how the changes impacted your overall calculations.

In addition to the information listed above, your tax return will also include general information like your social security number, the tax year being impacted, and the notice date.

Will I Receive a Refund Check if I get a CP12 Notice?

In most cases, you will receive a refund check from the IRS for the amount of the adjusted refund that has been listed on the CP12. However, there are two cases where you will not receive a refund check:

  • You have outstanding tax debts – If you owe the IRS taxes from a previous tax year, then the IRS will deduct those taxes from the refund amount.
  • You disagree with the changes – If you dispute the changes, the IRS will hold off on sending the check until the dispute has been resolved.

What Should I Do if I Receive a CP12 Notice?

If you receive a CP12 notice, the first thing to do is to review the notice in its entirety and ensure that you agree with all of the changes made.

If you agree with the changes, you don’t need to do anything else! You should receive a refund check within 4 to 6 weeks and should keep a copy of the notice for your records.

What Should I Do if I Disagree with a CP12 Notice?

If you disagree with the changes identified on the CP12 notice, you have 60 days from the notice date to notify the IRS. Contacting the IRS about a disagreement will cause them to automatically reverse the change and no longer send a refund check.

You don’t need to provide a justification for the disagreement; however, if the IRS disagrees with your disagreement, then they may audit your account. Therefore, it’s in your best interest to provide supporting documents if you disagree with a CP12 notice.

Your CP12 notice should include information on how to contact the IRS if you do disagree with the document. It’s always best to communicate in writing so you have documentation of what you sent.

What if I Ignore a CP12 Notice?

A CP12 notice is one of the few IRS notices that you can ignore without penalty. If you don’t respond to the notice, then the IRS will send you a refund check in the mail regardless.

How is a CP12 Notice Different from a CP11 Notice?

A CP12 notice is the exact opposite of a CP11 notice. Both indicate that the IRS has automatically corrected an error on your tax form. However, a CP12 notice generally means that you’ll be getting money back from the IRS, while a CP11 notice means that you owe the IRS additional money.

How to Prevent Future Errors on Your Tax Return

It’s always in your best interest to file your tax return accurately. Receiving a CP12 Notice means that you made a mistake on your tax return. While it worked out in your favor this time, the IRS could easily adjust a non-favorable error in the future (or miss an error completely), and you could end up missing out on additional money or overpaying the IRS.

In order to avoid math errors on your federal tax return, it’s best to use an online tax filing software that does all of the calculations and checks for you.

When to Get Tax Help

If you’re disputing a CP12 notice, the last thing you want is to have the IRS audit you. Therefore, if you do plan to dispute the notice, it’s in your best interest to consult a tax professional to ensure you’re providing all the documentation needed to support your dispute.

At IRS Shield, we’ve got your back! Our team of tax professionals can help answer any questions you may have about your CP12 notice and even work with the IRS on your behalf. Sign up to become a member today!

CP11 Notice: Changes to 1040, Math Error

Receiving a letter from the IRS can be an intimidating experience for many taxpayers. One of the most common notices sent by the Internal Revenue Service is the CP11 Notice. If you’ve recently received this letter, fear not!

In this blog post, we will demystify the CP11 Notice, explaining its purpose, what it means for you, and the necessary steps to resolve any issues.

What is a CP11 Notice?

The CP11 Notice is an official communication from the IRS informing taxpayers about changes made to their tax return. It typically indicates that there were discrepancies or errors identified during the processing of your return, resulting in an adjustment to the amount of tax owed or the refund due. The notice is sent to the address provided on your tax return, so it’s crucial to promptly review its contents.

Understanding the Contents

When you receive a CP11 Notice, carefully read through its contents to comprehend the changes made by the IRS. The notice typically includes:

  • Explanation of Changes: The IRS will outline the adjustments made to your tax return, indicating the specific areas where discrepancies or errors were found.
  • Tax Liability: The notice will state what changes were made and specify the additional amount owed, including any penalties and interest accrued.
  • Refund Adjustment: If the changes result in a decreased refund amount or no refund at all, the notice will provide details regarding the revised refund and the reasons for the adjustment.
  • Payment Options: The CP11 Notice will include instructions on how to make a payment if you owe additional taxes. The IRS provides various payment methods to ensure convenience and ease of settling your tax liability.

Responding to a CP11 Notice

It’s essential to take immediate action upon receiving a CP11 Notice to avoid further complications. Here are the necessary steps to follow:

  • Review the Notice: Thoroughly examine the notice, comparing it with your original tax return. Identify the areas where adjustments were made and try to understand the reasoning behind the changes.
  • Gather Documentation: Collect all relevant documentation, including receipts, statements, and supporting documents for the disputed items on your tax return. Having this information readily available will help you during the resolution process.
  • Respond within the Deadline: The CP11 Notice specifies a deadline for responding. Ensure that you adhere to this deadline. Failing to respond within 60 days may result in further penalties and interest.
  • Contact the IRS: If you disagree with the adjustments made, contact the IRS using the contact information provided in the notice. You can also call the phone number mentioned on the CP11 Notice to discuss the changes and provide any necessary documentation to support your case.

If you agree with the CP11 Notice, then you will need to make the payments that you owe to the IRS. You can use the IRS payment tool to make the payment or set-up a payment plan if you can’t afford the entire balance immediately.

When to Get Help

The IRS does make errors when issuing CP11 notices. Knowing what documentation to provide or how to most effectively communicate with the IRS isn’t always clear. If you’re looking to dispute your CP11 notice, it’s best to get help from a tax professional.

 IRS Shield provides protection from the IRS at a fraction of the cost of hiring a CPA. Our team of tax professionals will help you respond to CP11 notices and even work with the IRS to get your discrepancy resolved. Become a member today to get protection from the IRS.

The Best Way to Contact the IRS

If you have a question about your tax return or want to know where your refund is, it is possible to contact the IRS. However, you should be prepared to wait a while before you’re able to speak to a real person (more on that below).

You can contact the IRS by calling the general help line at 1-800-829-1040. However, there may be better ways to reach the IRS, depending on your reason for contacting them.

Calling the IRS

It is possible to reach an actual person by calling the IRS. However, you should be prepared to wait in order to get a hold of someone. According to the 2021 National Taxpayer Advocate Annual Report to Congress, customer service representatives at the IRS only answered 11% of the 282 million calls made. The average hold time was 23 minutes.

While there is a general helpline to call, 1-800-829-1040, you might get a hold of someone more quickly if you try calling a line designed specifically for your question. Reference the chart below to see if your question has a designated line.

IRS Phone Numbers
Reason for Contacting Phone Number
Disaster Victims 866-562-5227
Estate and gift tax 866-699-4083
Excise tax 866-699-4096
Help getting your EIN 800-829-4933
Identity theft 800-908-4490
Innocent spouse relief 866-681-4271
Lost ITIN documents 800-908-9982
Balance due questions 800-829-0922
Tax liens 800-913-6050
Help with self-employed business tax return 800-829-0115
Self-employed taxpayers with an account or a tax law question 800-829-4933

The IRS phone lines are open from 7 am to 7 pm (local time) and are closed for federal holidays. You’re more likely to get a hold of someone if you call early in the morning. It’s also best to avoid the days surrounding tax filing deadlines (if you can).

What You Need to Contact the IRS

The last thing you want is to finally get a hold of someone at the IRS and not have the information that you need in order to proceed. Before contacting the IRS, you should collect the following items:

  • Social Security number or ITIN
  • Filing status
  • Date of birth
  • Prior-year return and/or any year’s tax return that you have a question about
  • Any IRS correspondence that you have received recently

Contacting the IRS Online

While the IRS doesn’t have a customer service e-mail, there are several online tools that you can use to answer some of your tax questions. Some of the most commonly used online IRS tools include the following:

These are just some of the online resources that the IRS offers to taxpayers. For a full list of resources, visit the IRS help page.

Meeting the IRS in Person

Most people don’t realize it, but you can actually meet with the IRS in person. Every state has at least one Taxpayer Assistance Center. You can use the Taxpayer Assistance Center Office Locator to see which office is closest to you. Then call 844-545-5640 to set up an appointment.

Appointments can be hard to come by. Therefore, you should use in-person meetings as a last resort.

Avoiding Scams

The IRS will rarely, if ever, contact an individual taxpayer via phone. Therefore, if you’re having trouble getting a hold of the IRS via phone, it’s important to be wary of any calls that may come from the IRS. The IRS does most of its communication via the US postal service and will never call you demanding payment. If you are making a payment to the IRS, make sure it’s through a verified source like their website and not some third-party app or wire transfer.

How to Get Quick Tax Help

If you’re looking for fast, reliable tax assistance, consider IRS Shield. Our team of tax experts can help answer your questions and walk you through any notices you may receive from the IRS.

Avoid long wait times and get answers quickly with IRS Shield.

What to Do if the IRS Contacts You (and why they do)

Everyone dreads being contacted by the IRS, but few think of what the right steps to take are if they do reach out.

How do you know if the information the IRS has is accurate? What if it’s not? How do you know if it’s actually the IRS contacting you?

There is no need to panic. This post will teach you what to do if the IRS contacts you.

What to Do If the IRS Contacts You

Getting contacted by the IRS can be frightening. They typically contact taxpayers by sending a paper notice via the mail. If you do receive a notice, follow these simple steps:

  • Don’t ignore it – receiving a notice from the IRS typically requires some form of action. If there is a response from you needed by a specific date, make sure to comply to minimize additional interest and penalty charges.
  • Read the notice in its entirety – make sure to read the entire notice and that you agree with the information. If you don’t agree, respond as directed in the notice.
  • Dispute or pay – if you disagree with the notice, you can dispute it. There are usually instructions on the notice on how to do so. If you do agree with the notice, then you should pay what you owe or work out a payment plan with the IRS.

If you’re having trouble understanding what an IRS notice means, you can search the IRS website based on the notice number for more information.

What to do If You Disagree with an IRS Notice

The IRS does make mistakes and can send out notices when you don’t actually owe any money. If you think the IRS has made a mistake by sending you a notice or an error in calculating what you owe, then you do have the option to dispute a notice.

Disputing a notice can be a difficult and lengthy process. IRS Shield offers consultation with qualified tax professionals to help determine the best solution for you. They’ll even work with the IRS directly on your behalf to achieve a resolution.

How to Respond to an IRS Notice

It isn’t always clear how to respond to an IRS notice. In some instances, you may need to send additional documentation, while other instances may require you to pay the IRS money, and in some cases, they may not even need a response at all.

If you agree with the information on the notice, make sure you understand what the IRS expects as a response. If they are asking for additional documentation, make sure to collect all the documentation required before responding.

Avoiding Tax Scams

There are several scams of individuals impersonating the IRS to steal money. Most contact from the IRS comes via mail. Therefore, it’s important to be extra vigilant if you believe that you are being contacted by phone or text message. The IRS will only contact you via phone for special circumstances like:

  • Having an overdue tax bill
  • Trying to secure a seriously overdue tax return

In most of these cases, you would’ve received several notices via mail before receiving a phone call.

Additionally, if you do need to make a payment to the IRS, make sure it’s through their online payment portal. The IRS will not ask you to give payment details over the telephone.

Why Does the IRS Contact You?

The IRS may contact you for several different reasons. Not all of them are necessarily bad! Some of the reasons the IRS may reach out to you include the following:

  • There’s been a change to your refund
  • They are questioning the information on your tax return
  • They need to verify your identity
  • You have an overdue balance
  • The information you provided on your return was insufficient, and they need more detail
  • Your return has been changed due to an error
  • There is a delay in processing your return

If you want to learn more about the types of notices the IRS sends, read our article on what the IRS sends notices for.

When Should I Get Help?

If you have the slightest suspicion that the notice is inaccurate or are confused about what to do next, you should get help before taking action. IRS Shield can help you understand your notice, determine appropriate action, and even work with the IRS on your behalf. Reach out to us today to get started resolving your IRS notice.

Understanding Tax Penalties and Fines

Mistakes happen; sometimes, you miss a tax payment or forget to file your taxes on time. Understanding IRS tax penalties and fines is essential to avoiding penalties altogether or limiting the amount you owe to the IRS.

This article covers the basics of how IRS penalties work and provides tips on avoiding them or limiting what you owe.

What Does the IRS Charge Penalties For?

The IRS expects you to meet your tax obligations year after year without fail. If you fail to meet your tax obligations, you will most likely pay a penalty.

Some of the reasons that the IRS may charge a penalty includes failing to:

  • File your return by the deadline
  • Prepare an accurate return
  • Pay any taxes that you owe on time and in the correct way

While there are several penalties the IRS may assess, almost all of them are charged because of one of the three reasons above.

How Do You Know if You Owe the IRS a Penalty?

The IRS will notify you that you owe a penalty via an IRS notice or letter that is sent in the mail. The letter will describe why you are receiving the penalty, how much you owe, and what the next steps are.

If you miss the initial notice, don’t worry! The IRS will send a follow-up notice letting you know that they haven’t heard from you and that you now owe more money than before.

The IRS has a different notice or letter for practically everything. To learn about the different types of notices, read our article entitled, “What Does the IRS Send Notices For?“

How Do IRS Penalties Work?

Each type of IRS penalty works a little differently. However, there are two basic components to each penalty:

  • Penalty – the amount owed for failing to meet your tax obligation on time.
  • Interest – the increase of the penalty amount and any owed taxes over the period you fail to pay your penalty and owed taxes.

The interest charged on your taxes typically occurs for each month that you fail to pay your taxes and penalties. Therefore, it’s best to pay any owed taxes before the start of the next month to avoid additional interest. However, the good news is that most IRS penalties typically have a cap on the amount that can be charged.

Common Types of Tax Penalties

The IRS has a long list of penalties that they send notices and letters for. However, there are a few penalties that are assessed more often than others.

Failure to File

The failure to file a penalty occurs when you fail to either file an extension or file your taxes by the tax deadline. The penalty is 5% of your unpaid taxes for each month that your return is late, with a maximum cap of 25% of the taxes owed. This penalty is not applied if the IRS actually owes you a tax refund, but you may lose your refund if you fail to file within three years of the original due date.

Failure to Pay

The failure-to-pay penalty happens when you fail to pay taxes owed to the IRS on time. The penalty is 0.5% of the taxes owed per month, with a cap of 25% of the total taxes owed. Filing a tax extension will help you avoid a failure-to-file penalty, but not a failure-to-pay penalty.

Underpayment of Estimated Taxes

If you are self-employed or don’t have taxes taken out of your paycheck, you need to pay the IRS estimated quarterly payments. At the end of the year, if you owe more than $1,000, you could be charged a penalty.

The penalty is assessed based on the difference between the amount of estimated taxes you paid in each quarter and the effective interest rate for that quarter. The rate and amount that you may owe as a penalty can vary from quarter to quarter.

The IRS does offer two “safe harbor” options if you do end up miscalculating your estimated taxes. If you pay 90% of the taxes you owe in the current year or 100% of the previous year’s owed taxes (and make estimated payments), then you can potentially avoid the penalty.

Dishonored Check

If you write a check or set up an automatic withdrawal and don’t have the money in your account to cover the amount, the IRS will assess you a penalty.

The penalty for a dishonored check is 2% of the check’s value. However, if the check is less than $1,250, the penalty is $25, or the amount of the check if it’s lower than $25.

How to Avoid IRS Penalties

The best way to avoid IRS penalties is by filing and paying your taxes on time. However, mistakes do happen, and the IRS recognizes this. In instances where you have reasonable cause for missing a penalty or payment, or it’s your first offense, the IRS may waive the penalty.

Getting penalty abatement from the IRS isn’t always easy. Therefore, it’s best to use IRS Shield to help walk you through working with the IRS. We can help you communicate your situation to the IRS to give you the best shot at being approved for penalty abatement.

If this isn’t your first time getting a penalty or you’ve accrued a large amount of tax debt, check out our article on how to resolve your debt with the IRS.

How to Resolve Your Debt with the IRS

Falling into debt with the IRS is never a good idea. However, surprises happen, and unexpected taxes pop up. The good news is if you owe a large amount of money to the IRS, you may not have to pay it all!

You can resolve your debt with the IRS in 3 simple steps:

  1. File your taxes
  2. Ask an expert
  3. Consider your options

In this article, we look at each step in detail to help you move forward with resolving your IRS tax debt.

Step 1: File Your Taxes

It is absolutely essential to file your taxes each year! You should file your taxes even if you can’t afford to pay them.

While you do have to pay penalties on unpaid taxes, you’ll pay additional fees if you don’t file your taxes. The failure-to-file-penalty is 5% of the taxes owed per month, up to a maximum amount of 25%. Failing to file can significantly increase your tax debt.

If you’re not ready to file your taxes by the mid-April due date each year, you can file a tax extension to get an additional 6 months to file.

Step 2: Ask an Expert

If you owe a debt to the IRS, you should consult an expert before paying any debt. Depending on your financial situation, there are plenty of options that could help you avoid paying the full amount of debt.

While tax accountants can be very expensive, IRS Shield provides an alternative solution at an affordable price. For a low monthly fee, you can have access to tax professionals throughout the entire year. They can help walk you through your options and potentially save you money owed in back taxes!

If you currently owe a debt to the IRS and want help, you can contact our team here.

Step 3: Consider Your Options

When paying down tax debt, you have plenty of options to help you get out of debt quickly and pay less than the full debt amount. It’s vital to consider all of the options available to you and choose the option that makes the most sense for you.

Installment Plans

Installment plans are a good way to pay down an unexpected tax bill at the end of the year but don’t have the cash on hand to pay the full amount owed. Installment plans allow you to pay the debt in monthly payments set by the IRS.

In order to qualify for an installment plan:

  • Your IRS debt must be less than $50,000
  • You must be up-to-date with filing your tax returns

While installment payments are a great way to break a large debt into manageable payments, you still have to pay interest on the debt. Therefore, it’s better to pay the full amount of your IRS debt upfront if you are able to.

Offer in Compromise

The IRS wants to collect as much of the owed debt as quickly as possible. That’s why if you truly can’t afford to pay your tax debt, even in installments, the IRS may consider agreeing to an offer in compromise.

In order to qualify for an offer in compromise, you have to submit an application to the IRS that essentially details your entire financial situation. The IRS will look at your outstanding debts, income, and investments to see if you truly can’t afford to pay down the debt.

If you are approved for an offer in compromise, then the IRS will reduce the amount of debt you owe based on your financial situation. The full newly agreed-upon balance will be due within two years of finalizing the agreement.

Statute of Limitations

The IRS has 10 years from the date that you filed your taxes to collect any debt, penalties, or interest. While waiting 10 years to resolve tax debt may seem like an easy way out, the IRS will take serious action to collect any owed debt. They can garnish your wages, seize your property, and much more.

Currently Not Collectible Status

Instead of trying to hide from the IRS for 10 years, if you truly cannot pay any amount of the tax debt you owe, you can apply for currently not collectible status. While you still will eventually need to pay your taxes, it puts a hold on tax levies, wage garnishment, and most other actions the IRS can use to collect the debt.

Filing for Bankruptcy

A last resort option to resolve your IRS debt is to file for bankruptcy. Filing for bankruptcy can eliminate any debt you owe, but it comes with serious consequences. It may make it difficult to borrow money ever again, and it certainly will damage your credit rating for an extended period of time.

Choose the Option That’s Best for You

Before picking an option to resolve your tax debt, it is essential to consult a tax professional. We’ve only briefly touched on the options to resolve your IRS debt and each option comes with its own benefits and disadvantages. You need to ensure that you understand the consequences and benefits of each option before attempting to work with the IRS.

 

What Does the IRS Send Notices For?

IRS notices can often be confusing, with strange coding and lengthy, unclear explanations of what they mean. It’s stressful enough getting a notice that you owe the IRS money, but having to decipher why you owe money and what you should do seems unfair.

IRS Shield has you covered! In this article, we look at what some of the most common types of IRS notices mean and actionable steps to take after receiving each notice.

Types of IRS Notices

The IRS has several different types of notices that they commonly send. The notices are always identified with a code. Notice codes start with CP, while letter codes start with LTR. Some of the most common letters and notices sent from the IRS include:

  • Notice of Proposed Adjustment (CP2000)
  • Notice of Balance Due (CP14)
  • Reminder of Balance Due (CP501, CP502)
  • Intent to Levy Notice (CP504)
  • Intent to Seize Assets and Notice of Your Right to a Hearing (CP90)
  • Refund of Overpaid Taxes (CP12)
  • Changes to 1040, Math Error (CP11)

This section looks at a brief overview of each type of notice and actionable steps to take when receiving said notice.

Notice of Proposed Adjustment – CP2000

If you receive a CP2000 notice from the IRS, it means that there was a difference between the income that you reported on your federal tax return and the income reported to the IRS by third parties. This is an automated notice and is therefore not double-checked by an individual.

The CP2000 comes with instructions and a response form. On the form, you can dispute or agree with the discrepancy. It’s important to complete the response form within the allotted time frame, or else you may lose your opportunity to dispute the information.

Read the article What is a CP2000 Notice to learn more about the details of the notice and how to respond to the IRS.

Notice of Balance Due – CP14

A CP14 notice is the IRS informing you that you have an unpaid balance and you need to pay it. You’ll typically receive a CP14 if you reported that you owed taxes on your tax return but have not paid them.

If you agree with the information on the notice and have the money to pay your balance, you should do so immediately to avoid further penalties. However, if there is a discrepancy or you are unable to pay the balance, you should work with the IRS to get the error corrected or set up a payment plan. For further details on action items, check out What is a CP14 Notice.

Reminder of Balance Due – CP501 & CP502

The CP501 is very similar to the CP14 in that it lets you know that you owe the IRS money. Most people with an outstanding balance will receive a CP501 and a CP14.

The CP502 is a second reminder that you have an outstanding unpaid tax balance. If you receive this notice and have already paid your balance, it’s essential to contact the IRS to confirm that you’ve made payment.

Intent to Levy Notice – CP504

You will receive a CP504 if you have received a notice from the IRS stating an unpaid balance and failed to either set up a payment agreement or pay the balance. The CP504 is also known as “the final notice” and informs you that the IRS intends to levy your state tax refund.

At this point, if you have not already, you should work out an agreement with the IRS. Read an Overview of Tax Debt Relief Options for the best way to proceed.

 Intent to Seize Assets and Notice of Your Right to a Hearing – CP90

If you don’t have a state refund or it’s not enough to cover your unpaid balance, the IRS will send you a CP90. The IRS will start taking money from your paychecks, bank accounts, or even physical property if the balance remains unpaid.

If you receive a CP90, you should contact a professional. IRS Shield is here to help walk you through your options and work with the IRS on your behalf to get you the best possible outcome. Sign-up for our service to get professional support ASAP.

Refund of Overpaid Taxes – CP12

A CP12 is one of the few good notices that you can receive from the IRS. It is essentially the IRS version of “bank error in your favor.” It means that the IRS has made a correction to your tax return that resulted in either you receiving a larger refund or less money owed.

As long as you agree with the correction, you don’t need to do anything! You should receive a check in the mail from the IRS in 4 to 6 weeks for the overpayment or additional refund.

Changes to 1040, Math Error – CP11

The CP11 is sent from the IRS when a math error is identified on your tax return, but it results in you owing more in taxes to the IRS. Essentially it is the exact opposite of the CP12 notice.

As long as you agree with the correction, all you need to do is pay the owed balance to the IRS. You do not need to submit an amended tax return.

Additional Information on IRS Notices

While we’ve only covered some of the most common notices from the IRS in this article, there are several other notices that you can receive from the IRS. For additional information on how to handle IRS notices, read:

For complete peace of mind, make sure to sign-up for an IRS Shield Membership. With a membership, you get help walking through all of your options when responding to a notice, and we will even respond to several common IRS notices on your behalf. All of this is included for a fraction of the cost of hiring a personal tax accountant!

What is a CP14 Notice?

Receiving a notice from the IRS can be extremely stressful. However, receiving a CP14 Notice can be particularly taxing as it indicates you owe money to the IRS.

The CP14 Notice informs a taxpayer that there is an overdue unpaid balance of taxes to the IRS. In addition, it outlines the fees and penalties assessed for failing to pay a tax balance on time.

As with receiving any notice from the IRS, it’s essential to take action before the due date listed on the CP14. This article examines what a CP14 notice means and your options moving forward.

Why am I Getting a CP14 Notice?

The CP14 Notice is an initial notice letting you know that you owe unpaid taxes, penalties, and/or interest to the IRS. It is an automated notice that goes out to anyone with an unpaid tax balance.

The Notice contains:

  • Billing summary of the money owed to the IRS
  • Due date of the balance owed
  • Payment options (including what to do if you can’t pay the balance in full)
  • Consequences for ignoring the Notice

You have 21 days from the notice date to respond to the Notice or pay the balance. Note that the notice date may be different from the date that you receive the Notice.

What Should I Do If I Receive a CP14 Notice?

When you first receive a CP14 notice in the mail, you should review the contents of the Notice in detail. Pay special attention to the amount owed and the due date of the balance owed.

The actions you should take following the receipt of a CP14 notice depend on the accuracy of the Notice and your financial situation. However, the key is that you take some sort of action. Ignoring the Notice will only worsen the situation, and the IRS can take serious action to collect outstanding debt. Let’s look at the next steps you should take depending on the abovementioned factors.

What if My CP14 Notice is Inaccurate?

The CP14 Notice is an automated notice from the IRS if you have an outstanding unpaid balance. The automated system does make mistakes, so it’s important to look over your tax return and see if you actually should owe money.

While you have a copy of your tax return out, you should also check to see if you missed any deductions or credits that may be able to cover the balance owed. If you find a deduction or credit you overlooked, you should file an amended tax return.

If you plan to file an amended tax return, you should notify the IRS of your intentions and file the amended return before the balance due date listed on the CP14.

What If I Can’t Pay the Balance Due on My CP14?

If you can’t pay the balance due on your CP14 by the due date, you should contact us to discuss your best option. You must reach out as soon as possible so that you can contact the IRS prior to your payment due date. In general, you have three options to either delay the payment or work with the IRS to reduce the amount owed.

  1. Request an extension. If you need some extra time to collect the balance owed, you can call the IRS and ask for up to an additional 120 days to pay. At the end of the 120 days, you must pay the entire balance in full.
  1. Reduce or erase the penalty. If this is the first time you’ve been assessed a failure-to-pay penalty in the past three years, you can request a first-time penalty abatement. If you call the IRS directly, they may waive the penalty, given that you can pay the taxes owed. If this is not your first time, it’s best to work with an IRS Shield tax expert to asses other potential avenues for removing the penalty.
  1. Work out an agreement with the IRS. If you truly can’t pay the balance within 120 days, you should not just ignore the Notice. The IRS offers several tax debt relief options so they can collect at least part of the balance. Some more common solutions include installment agreements or an offer in compromise.

Should I Ask for Help If I Get a CP14 Notice?

If you receive a CP14 notice, it’s best to contact us before paying or responding to the Notice. The IRS does make mistakes, so it’s essential to have your tax return reviewed by a professional to ensure that you do owe taxes to the IRS.

In addition, there are several ways to reduce the amount owed to the IRS. For example, if this is your first time with an overdue balance, you can have the IRS waive your failure-to-pay penalty. Reaching out to IRS shield helps you pay the IRS less and gives you the comfort of having experienced individuals who know what they are doing and walk you through your next options.

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.

Offer in Compromise: How it Works

Offer in Compromise: How it Works

If you find yourself with a crushing amount of tax debt with no way to pay it off don’t panic. The IRS routinely eliminates tax debt for individuals in these situations by agreeing to an offer in compromise. What is an offer in a compromise?

An offer in compromise is an effective tool to negotiate down your tax debt when you are unable to pay the taxes owed to the IRS. Essentially you are admitting that you won’t be able to pay your back taxes and are instead offering the IRS a compromise so that they collect at least a portion of the money you owe.

In this article, we will look at the process for proposing an offer in compromise and how to tell if you qualify. Additionally, we’ll cover what to do if the IRS rejects your offer and if there are any downsides to using this tool.

How Does an Offer in Compromise Work?

The idea behind an offer in compromise is quite simple. The IRS wants to collect the money you owe, but you don’t have the money to pay them. Instead of spending countless man-hours trying to collect that money, the IRS agrees to let you pay back what you can afford to pay.

However, in practice, the process is quite complicated. It’s strongly recommended that you get contact us prior to submitting an application for an offer in compromise, as one wrong step could result in your offer being rejected.

The application process involves completing the following steps:

  • Filling out Form 656 (offer in compromise)
  • Completing Form 433-A (collection information statement for wage earners and self-employed individuals)
  • Completing Form 433-B (collection information statement for business)
  • Submitting a $205 application fee
  • Submitting your initial offer payment (first payment of installment plan or 20% of lump-sum payment).

There are several intricacies throughout the application depending on your individual financial situation. If you are looking for a complete step-by-step guide on how to complete an offer in compromise check out the Form 656 Booklet.

How do I Qualify for an Offer in Compromise?

There are some fairly stringent guidelines for even being considered for an offer in compromise by the IRS. The IRS will only consider your application if you meet one of the following criteria:

  • There is a doubt about the amount that you owe to the IRS.
  • There is a doubt that the IRS can fully collect on the debt, meaning that your assets and income are less than the amount of back taxes that you owe.
  • Paying the debt would cause undue economic hardship.

If that wasn’t enough, you won’t qualify if any of the following situations apply to you:

  • You are in an open bankruptcy proceeding.
  • You haven’t filed your federal tax returns.
  • You have not made the required estimated tax payments.
  • You are self-employed, have employees, and have not submitted your required federal tax deposits.

Additionally, even if you meet the above criteria, it doesn’t necessarily mean that your offer will be approved. The IRS also considers your:

  • Ability to pay
  • Income
  • Expenses
  • Assets

As you can see the IRS wants to make sure that you have been “playing by the rules” and are actually unable to pay prior to even considering your offer in compromise application.

What Financial Information Do I Have to Provide for an Offer in Compromise?

When submitting an offer in compromise, the IRS wants to get a complete picture of your entire financial situation. Therefore, they require you to provide the following information when submitting your offer in compromise:

  • Income and expenses
  • If you have declared bankruptcy
  • If you are a beneficiary
  • Contents of your investments, personal banking accounts, insurance policies, and available credit.
  • Owned assets like real estate, vehicles, and even intangibles

It’s important to note that there are certain financial obligations that the IRS will not consider when looking at your financial situation. For example, they won’t consider college debt, voluntary retirement contributions, or payments on unsecured debt as expenses.

Why Will the IRS Reject an Offer in Compromise?

Even if you meet all the qualifications for an offer in compromise there is no guarantee that the IRS will approve. On average, about 40% of qualifying offers in compromise applications are approved.

Some common reasons the IRS rejects a qualified offer in compromise include:

  • Your offer is too low or the IRS thinks that they can collect on the full amount. They will inform you how much they think you should pay if this happens.
  • You failed to provide enough information to give a full picture of your financial situation.
  • You’ve missed tax payments for the current year, proving that you are still a risk.
  • You’ve been convicted of a serious crime.

It’s important to be very meticulous when completing your offer in compromise application. Failure to demonstrate the need for an offer in compromise could be detrimental to your personal finances.

What Can I Do If the IRS Rejects an Offer in Compromise?

If the IRS rejects your offer in compromise you have a few options. If you want to revise your original offer within 30 days of submitting your application, you can simply send a letter increasing the amount of money. If 30 days have passed since submitting, you will need to submit a new Form 656 to revise your offer.

If you receive a rejection letter and feel that your offer was sufficient, then you can file a Form 13711 within 30 days of receiving the rejection letter. This will allow you to identify which parts of the rejection you are disputing and why you are doing so.

Are There Any Downsides to Applying for an Offer in Compromise?

There are a few downsides to applying for an offer in compromise. So, it’s important to weigh the pros and cons before starting the process.

The most obvious downside is the time it takes to complete the paperwork and process. All said and done, the entire offer in compromise process typically takes about a year.

Another important consideration is that the offer in compromise isn’t actually finalized until 5 years after the agreement has been made. You need to stay compliant with your taxes during this time period or the IRS can void the agreement and you will still owe the full amount.

Finally, the 10-year statute of limitations is put on hold during the offer in compromise process. Typically, the IRS is required to collect back taxes within 10 years. However, if you apply for an offer in compromise, then the time limit is put on hold.

For example, if you apply for an offer in compromise with five years remaining on the statute and the IRS takes a year to reject your offer, they will still have five years to collect.

Should I Get Help Applying for an Offer in Compromise?

The application process for an offer in compromise is extremely litigious and detailed. It’s not advised that you embark on the process without professional help.

At IRS Shield, we can help you prepare your application and walk you through all of your options. That way you have the knowledge you need to submit your application with confidence and have the best shot at getting your offer in compromise approved.