Understanding IRS Notice CP12 and How to Resolve It

Dealing with IRS notices can be intimidating, especially if you're unsure about what they mean or how to respond. One such notice that many taxpayers receive is the CP12 Notice. In this blog post, we'll break down what IRS Notice CP12 is, why you might receive it, and most importantly, how to resolve any issues it raises.

What Is IRS Notice CP12?

The CP12 Notice is sent by the IRS to inform you that they have made changes to your tax return because they identified an error. As a result of this correction, either your tax liability was reduced, or you are due a refund. Essentially, the IRS has reviewed your return, found something wrong, corrected it, and is letting you know about the changes.

The changes may involve:

• Mathematical errors in your calculations
• Incorrect credit amounts claimed
• Incorrectly reported income
• Adjustment to refundable credits (such as the Earned Income Tax Credit)

In many cases, receiving a CP12 Notice means that you will be receiving a smaller refund than expected or possibly even owe nothing at all.

Why Did I Receive a CP12 Notice?

The IRS issues a CP12 Notice when they find an error on your tax return that needs correction. Here are a few common reasons why you might receive this notice:

1. Simple Calculation Errors: You may have made a mistake in adding or subtracting numbers on your return.
2. Incorrectly Claimed Credits: For example, the IRS may adjust the amount of a credit you claimed (such as the Child Tax Credit or the Recovery Rebate Credit) if it doesn’t match their records.
3. Changes in Reported Income: If the IRS finds discrepancies between what you reported and what was filed with them by third parties (such as employers), they may adjust your return.

What Should I Do If I Receive Notice CP12?

Receiving a CP12 Notice can be confusing, but it doesn't have to be a cause for alarm. Here’s a step-by-step guide on how to handle it:

1. Review the Notice Carefully: The CP12 Notice will outline the changes the IRS made to your return and provide an explanation of why they made those adjustments. Make sure you understand these changes.
2. Compare the Changes with Your Tax Return: Cross-check the information on the notice with your original tax return. You’ll want to verify if the IRS is correct in its assessment or if you believe there has been a mistake.
3. Accept or Dispute the Changes:
   • If you agree with the changes, you don’t need to do anything further. The IRS will either adjust your refund or apply the corrected amount to your tax account.
   • If you disagree with the changes, you have 60 days from the date on the notice to contact the IRS. You can do this by calling the number provided in the notice or sending a letter explaining why you disagree. Make sure to include any supporting documentation that can back up your claim.
4. Check for Refund Adjustments: If the notice indicates that you’ll be getting a refund (or a smaller refund than you expected), monitor your bank account or mailbox for the adjusted refund amount. Keep in mind that it may take several weeks to process.

What Happens If You Ignore a CP12 Notice?

It’s essential to respond to the notice promptly if you disagree with the IRS’s assessment. If you don’t respond within the 60-day window, the IRS will assume that you accept the changes and adjust your tax return accordingly. This could mean that you’ll miss out on receiving a refund you might have been entitled to or end up overpaying your taxes.

Tips for Preventing Future CP12 Notices

While errors on tax returns are common, there are a few steps you can take to minimize the chances of receiving a CP12 Notice in the future:

• Double-check your calculations: Even if you use tax software, mistakes can happen. Review all numbers carefully.
• Review tax credits carefully: Make sure you qualify for any credits or deductions you're claiming, and ensure you're reporting them correctly.
• Use tax software or consult a tax professional: These tools can catch many errors before they reach the IRS, saving you time and hassle in the future.

Receiving an IRS CP12 Notice can be a bit unnerving, but it’s important to remember that it's not necessarily a bad thing. Often, it’s the IRS correcting a minor issue, and you may even end up with a refund. However, always take the time to review the notice carefully and act if you disagree with their changes.

If you're unsure how to handle the notice or need assistance in reviewing your tax return, consider consulting a tax professional who can help you navigate the process and ensure your taxes are accurate.