IRS Notice CP05 – Your Tax Refund is Being Held While The IRS Reviews Your Tax Return

Your tax refund is being held, pending a review of your tax return. The IRS may contact third parties to verify the information shown on the tax return.

IRS Notices CP05 & CP05A both indicate that the IRS is holding your refund pending a request for information.

The IRS CP05 letter is a notification to inform you that the IRS has placed a hold on the tax refund until they can verify one or more items reported on the tax return. This notification lets you know the tax refund you expected to receive in a few weeks may take more time to arrive. Or, if you did not file a return, it is a notification that a return has been filed using your personal information. If you did not file a return, the letter instructs you to complete and sign Form 14039 Identity Theft Affidavit. If you did file a return, before you panic, keep in mind that a review of your return at this point does not necessarily mean there is something wrong. This review is not an audit or inquiry, but frequently just a way to review your tax return information against other third-party tax reporting records.

Generally, no immediate action is required upon the receipt of a CP05. Instead, the IRS has provided a date on which they believe the review will be complete in the letter. The date is usually found in the section of the letter identified as “Next Steps.” If the IRS can verify the information in your return, the refund is simply released. If the IRS determines that the refund amount is incorrect, you could receive the adjusted refund amount; when the IRS makes an adjustment, another letter is issued to explain what adjustment(s) they made to your tax refund.

What if the IRS cannot verify the tax return?

When the IRS cannot verify the return, a follow-up letter is generally sent with a request for additional information. Due to the request for additional information, the IRS review of your tax return generally results in further delaying the receipt of your tax refund. The IRS may request information on anything from your filing status and dependents, the income you reported, claims for tax credits, withholding claimed on Social Security benefits, household help claimed, or the Schedule C income and expenses reported on your tax return. While many of these items can be under review, it is important to note that the CP05 is somewhat of a form letter. What this means is that just because all of these items may appear in the section noted as “We’ve received your 20XX tax return, and are reviewing it to verify,” the item may not actually be in your return or the actual issue under review.

Most CP05 letters will not require immediate action on your part. Generally, the IRS does its review within the timeframe noted, and the refund is released. However, if you have received a CP05 and the IRS has not completed the review in the time noted, you may need to take some form of action.