IRS Adjusted Tax Refund (What to Do When the IRS Changes Your Tax Refund Amount)

If you see that the IRS sent a notice claiming they made a change to your refund check amount, there’s no need to be alarmed. Every year, the IRS issues thousands of adjusted refund letters to taxpayers across the country. An IRS adjusted refund letter doesn’t mean you did anything wrong. Instead, it’s a simple notice letting you know a change has been made to your refund.

Why was I notified by the IRS?

The IRS sends millions of notices to Americans each year for a variety of reasons. From information requests to identity theft notices, the IRS handles a lot. A common notice is what’s known as an adjusted refund notice. This notifies you of changes that the IRS made to your tax return. Whenever the IRS makes an adjustment to your return, they will send you a notice with the letters “CP” followed by a unique number on the top.  These different numbers indicate their reason for making an adjustment to your return.

What is a CP49 Notice?

A CP49 Notice is a notice that the IRS issues when your tax refund has been adjusted in order to pay off your existing tax debt. An adjusted refund means, rather than sending you a bill for your tax debt, the IRS has proactively taken either a portion or all of this year’s tax refund to pay off a prior year’s tax debt.  

In this notice, the IRS will outline your tax refund amount, your debt amount, and how much of the tax refund was applied to your debt. Finally, it will tell you how much of your tax refund, if any, remain.

As with all IRS notices, CP49 also outlines the reasons you may be able to dispute this adjustment and how to do so. It also will inform you of steps to take if you have remaining tax debt after the adjustment, such as enlisting in an IRS payment plan. 

What is a CP12 Notice?

A CP12 notice is another type of adjustment notice from the IRS. In this case, the IRS informs you that your tax refund has been changed due to an error that you made while filing. 

The IRS reviews every tax return that is filed each year. In their review, they verify calculations and cross-reference your reported financials with their records, in the event that you have made a miscalculation, the IRS will correct this miscalculation. If the correction results in a change to your tax refund, the IRS will send CP12.

Again, the letter will tell you how you can dispute the change if you believe it was made in error.

Understanding your notice

If you get an IRS adjusted refund letter in the mail, you may be confused about what you did wrong on your tax return. When you receive a letter from the IRS by mail, they will always provide contact information in the top right corner by the CP number so you can ask questions, or get more information on your case. Each notice will typically provide details on:

• What parts of your return or account the IRS is making changes to
• What information the IRS needs from you
• Why do I owe taxes
• Why the IRS is making the change
• Why the IRS needs your information
• When you should send your reply (if needed)

As previously mentioned, the IRS sends notices for a variety of reasons. You can always perform a notice and letters search on the IRS website to get more information on the notice or letter you received, along with answers to many tax refund FAQs. The main reasons you’ll receive an adjusted refund letter from the IRS is because:

• You have a balance due.
• You are due a larger or smaller refund.
• The IRS has a question about your tax return.
• The IRS needs to verify your identity.
• The IRS needs additional information.
• The IRS changed your return.
• The IRS needs to notify you of delays in processing your return.

If you have questions regarding your notice, simply contact the IRS with the information provided at the top of your letter. If you’ve lost your notice, you can call one of the following toll-free IRS phone numbers below between 7 am and 7 pm:

• Individual taxpayers: 800-829-1040; (800) 829-4059 (TDD)
• Business taxpayers: 800-829-4933

Now that you’ve looked over your IRS notice, it’s time to decide whether you need to take action or not. If you agree with your IRS-adjusted refund, you typically do not need to respond. However, if you disagree with your notice or if your notice requires you to send in a response, you must reply accordingly. If you’re unsure of how to respond to your IRS notice, our tax experts can help you do so. Or, you can follow these steps below if you’re notified by the IRS:

Step 1: Read

Every IRS notice contains pertinent information on your IRS refund status and why an adjustment was made. Take time to thoroughly read your notice and compare it with the tax return you filed. Doing so will allow you to see any mistakes you may have made, or identify any errors from the IRS.

Step 2: Respond

Some IRS notices are time-sensitive and require you to respond by a specific date. This is normally the case when you owe money. It’s important to respond as soon as possible before the deadline so that you can:

• Minimize additional interest and penalty charges.
• Preserve your appeal rights if you don’t agree with your notice.

Step 3: Pay

For IRS notices that require a payment, you must abide by and pay as much of the refund as you can. The IRS offers various payment options that work for your financial situation, such as a payment plan or having your account status changed to “Currently Not Collectible.”

Once you’ve figured the amount you owe, you can employ one of the IRS’ many payment methods to satisfy your tax balance. You can pay online, pay in cash at a retail partner, or send in a check or money order. Regardless of your situation, the IRS is willing to work with you. However, ignoring this notice will result in you owing more money from penalties and accrued interest. If you’re not sure which payment plan is right for you, you may consider speaking with a tax professional to help you evaluate your options.

Step 4: Keep a Copy

It’s extremely important to maintain a copy of all your tax records. It’s a common tax refund myth that only the rich can get audited. IRS audits typically begin three to four months after the filing deadline, but some audits can be performed years after it was received. Keeping a copy of all of your tax returns, notices, and letters will make situations like these easier to handle.

How to make corrections to a tax return

Mistakes happen, and the IRS knows that. The IRS is never out to get you; they are simply doing their job so they can collect taxes that benefit the public as a whole. That’s why the IRS gives you ample opportunity to correct your tax mistakes. If you made a mistake on your tax return or want to make corrections to a tax return from the previous year, you can correct this with an amended return.

What is an amended return?

An amended return allows you to fix your tax return in the event that you filed incorrectly. Amended returns are filed using Form 1040X. In Part III of your amended return, you’ll have the opportunity to explain why your taxes were filed incorrectly. It can take up to 16 weeks for your amended return to be processed.

Can I receive a fake IRS letter?

Yes, you can. Sadly, there are people out there who use the IRS name to swindle unsuspecting taxpayers into giving them their money. The IRS has a Report Phishing page where you can report any suspicious activity. The IRS will never contact you through email, text, or social media channels to request information. If you fall victim to one of these scams, report it immediately.