Understanding the IRS CP39 Notice: A Simple Guide
It can be a bit unnerving to receive a notice from the IRS, especially if you’re unsure of what it means. One such notice you might encounter is the CP39. Don’t worry; it’s usually good news! Let’s break down exactly what a CP39 notice is and how it affects you.
What Triggers a CP39 Notice?
A CP39 notice isn’t something you randomly receive. It is sent because something has caused a change to your tax account, and that change resulted in a credit being applied to your account. These situations typically occur when you:
- File an Amended Tax Return: If you realize you made a mistake on your original tax return and file an amendment (Form 1040-X), the IRS will send a CP39 notice once the amendment has been processed. This notice will confirm the changes and any credit due.
- IRS Makes an Adjustment: The IRS might correct an error or make an adjustment to your tax return. This could be based on information they have about you and your income. They will send a CP39 to inform you of this change and any related credit.
- Credit is Due: Sometimes, the IRS may determine that you are due a specific tax credit or benefit that you didn’t claim on your original tax return, in which case, a CP39 may be sent when they apply that credit to your account.
Breaking Down the CP39 Notice
The CP39 notice will likely include several key pieces of information:
- Your Information: This includes your name, address, and Social Security number (or EIN). Make sure this information is correct.
- Tax Year: The specific tax year the adjustment relates to. It is usually important to pay close attention to this, as it may not be the current year.
- Explanation: The notice will explain what caused the adjustment and the resulting credit. It could mention something like an amended return, a correction, or a credit being applied.
- The Credit Amount: The notice will specify the exact amount of the credit that has been applied to your account.
- How the Credit is Applied: The notice will explain how this credit is being used. This might include a payment applied to a past-due tax liability, being applied to an upcoming tax payment you will owe, or a refund.
- Instructions: The notice may provide further instructions. This could include a deadline to respond or contact information if you have questions.
What to Do When You Receive a CP39 Notice
Receiving a CP39 notice is generally not alarming but you still need to take certain steps to ensure everything is correct:
- Review Carefully: The most important step is to read the notice very carefully. Ensure the identifying information is correct, verify that the tax year indicated is correct, and double check that you understand why you have received it and how the credit has been applied. Make sure the credit amount is correct based on the amendment you filed or other adjustments you were aware of.
- Compare with Your Records: Check the notice against your records. If it’s related to an amended return, verify that the changes the IRS made match the changes you made on the Form 1040-X. If the adjustment was made by the IRS, make sure it appears to be accurate, as you will be expected to pay the appropriate amount.
- No Action (Often): Typically, if the information on the CP39 notice is accurate, you won’t need to take any further action. The credit is already applied to your account. The notice is simply to inform you of this change.
- Request an Explanation if You Don’t Understand If the notice does not fully explain the credit or why you received it, you may want to reach out to the IRS to confirm you understand the information.
- Contact the IRS if Needed: If you believe the information in the notice is incorrect, or if you have any questions, contact the IRS immediately using the contact information provided on the notice. Do not delay in addressing an incorrect notice.
- Keep the Notice for Your Records: Even if you don’t need to take any further action, it’s important to keep a copy of the notice in your tax files for future reference. It may be helpful if you need to refer back to a specific credit or change.
CP39 Notices vs. Other IRS Notices
It’s important to distinguish the CP39 notice from other IRS notices. For instance:
- CP2000 Notice: This notice is sent when the IRS identifies a discrepancy between the income you reported and the income they have on file (often from third parties like employers). It usually requires a response from you.
- CP501 Notice: This is a reminder notice that you have a tax balance due. This notice can be sent even if the amount is a small one.
- CP14 Notice: This notice is sent when you owe taxes, penalties, or interest.
- Notice of Deficiency: This is a formal notice from the IRS explaining that it believes your tax return contains a mistake that you need to address.
These notices are very different from the CP39. A CP39 is a confirmation of a credit to your account, while the other notices are often a request for payment or a requirement for additional information.
Why Do I Need a Credit on My Account?
It can be confusing to understand why a credit may be due on your account, but it is typically because you paid too much previously, and the IRS is correcting for it, either on their own, or based on your request. Here are a few examples:
- You Overpaid Your Taxes: If you paid more than necessary through withholdings or estimated tax payments during a given tax year, and are entitled to more money as a result, this will result in a credit on your account.
- You Claimed an Additional Deduction: If you claimed a valid additional deduction by filing an amended return that resulted in a lower tax liability, this will result in a credit on your account.
- You Qualified for a Credit: There may be credits that you qualified for and were not previously aware of. If the IRS later determines that you are entitled to a credit that you didn’t claim on your return, this could result in a credit on your account.
- IRS Corrects an Error: The IRS might find a mistake they made that caused you to pay too much in taxes. This would result in a credit on your account.
Common Mistakes and Misconceptions
- Ignoring the Notice: Some people mistakenly believe that all IRS notices are bad news and they simply discard them. This can result in a missed opportunity to understand how your account is changing and why. It can also mean not identifying and correcting a mistake in a timely manner.
- Panic: Receiving an IRS notice can be stressful, but a CP39 notice is usually good news. It’s essential to read it carefully and understand what it means rather than panicking.
- Assuming It’s a Refund: A CP39 notice does not necessarily indicate a cash refund is coming to you. It simply means there is a credit applied to your account. This credit may be used to offset a prior balance due, or may be applied to future taxes you will owe. If you are to receive a check refund, it will be mailed separately.
In Conclusion: The CP39 Notice Is Usually Good News
The IRS CP39 notice is generally a notification that a credit has been applied to your tax account. This usually means you paid too much in taxes or you were due an additional benefit and the IRS has adjusted your account accordingly. By reviewing the notice carefully and understanding what it means, you can stay informed about the status of your tax account and avoid any unnecessary worry. If you have any doubts or believe there is an error, always contact the IRS for clarification. Don’t be afraid of IRS notices; just approach them with knowledge and a calm demeanor.