There are two things in life that send shivers down your spine. When the power goes out in the middle of the night, and when you receive a CP05 Notice from the IRS. Both are unpleasant and unexpected. So what exactly does a CP05 letter mean, and what are you supposed to do when you get one?
First things first, don’t panic! This notice doesn’t necessarily mean that something bad is happening. In this article, we’ll go over certain situations that might result in a CP05 notice, and what to do when you get one.
What is a CP05 notice?
A CP05 notice is a letter from the IRS informing you that they are reviewing your tax return before issuing you a tax refund. This note doesn’t necessarily mean that you did something wrong. It’s simply just an informative letter letting you know what the status of your refund is.
Unfortunately, this notice usually isn’t very informative. It doesn’t tell you what exactly the IRS is reviewing. They might be reviewing your tax credits, reported earned income, child tax credit, or any other items on your tax return.
As an example, here is what a CP05 notice looks like:
What do I do if I receive a CP05 notice?
99% of the time, when you received this notice, you don’t have to do anything. Since this notice is there just to give you an update, usually don’t have to send anything back unless a subsequent letter is sent to you and they are requesting additional information.
However, they are different versions of the CP05 notice. Whenever you get a notice from the IRS, make sure you open and read it thoroughly to see what exact version you got. Let’s go over the 2 most typical CP05 versions.
If you received this notice, then the IRS is requesting that you send back certain information. This means that the IRS has reviewed your tax return and is needing additional information before processing your refund.
With this notice, they usually request you send them pay stubs, employment verification, etc. Here is what a CP05A notice looks like:
The CP05B Notice usually comes after you receive a CP05 or CP05A Notice. If you are due for a tax refund, this simply states that this refund is being held until the IRS can finish its review of your tax return. They will basically hold your tax return until you give them the information they have requested.
Here is what a CP05B notice looks like:
Does this mean I am being audited?
No, a CP05 notice does not mean you are being audited. This notice is just simply being informative and is not as consequential. This notice is there to simply keep you aware that the IRS is making sure that your information is correct.
Nobody really knows what triggers an IRS audit. Most of the time it’s just dumb luck. This also means that, if the IRS does find things that are inaccurate, it also doesn’t necessarily mean it will result in an audit.
What happens if the IRS finds problems on my tax return?
Once you have received all of your notices and sent them back they need information they might need, then the IRS might propose an adjustment to your tax return. The IRS would request that you sign this adjustment and send it back.
If an adjustment is made, this might result in a change in how much you owe the IRS. It might be more, it might be less, based on the errors that they found. At that point, you will have 90 days to sign and agree, then no further action would be needed.
If more than 90 days pass, and you don’t come to an agreement, then you may receive a notice of deficiency.
Regardless of what it may be, any letter from the IRS is nerve-wracking. However, it’s also important to remain calm and just send it back with the IRS may request. Before you know it, it will all be over, and you will get your adjusted refund.