CP49 Notice: Overpayment Applied to Previous Tax Debt

The CP49 Notice is sent by the IRS to notify taxpayers that their refund or overpayment from the current tax year has been applied to an outstanding tax debt from a previous year. Instead of receiving a refund, the overpayment is used to reduce or fully pay off the prior-year debt.

Key details of the CP49 Notice:

• Application of Overpayment: The notice explains that the IRS has used the taxpayer’s current-year overpayment or refund to offset an unpaid balance from a previous tax year. The notice will include a breakdown of the overpayment and the debt it was applied to.
• Impact on Refund: If the taxpayer’s overpayment exceeds the prior-year debt, the remaining balance will be refunded to the taxpayer. If the overpayment is less than the debt, no refund will be issued, and the taxpayer will still owe the remaining balance.
• What to Do Next: The CP49 serves as an informational notice, and no immediate action is typically required. However, taxpayers should review the notice to ensure the application of the overpayment is accurate and contact the IRS if they believe an error was made.
• Future Payments: If the taxpayer has ongoing tax debts, future overpayments or refunds may also be applied to those debts until the balance is fully paid.

The CP49 Notice is important for taxpayers to understand how their refund or overpayment is being used to satisfy previous tax obligations.