Glossary

CP70 Notice

What is an IRS CP70 Notice and What Should You Do About It?

A CP70 Notice is a notification from the IRS that your tax refund has been used to pay a past-due federal debt, like child support or student loans, that you owe. It explains why you didn’t receive your full refund and provides details on the debt that was satisfied. It is not a notice of a newly assessed tax liability.

Understanding the IRS CP70 Notice

Receiving mail from the IRS can be a bit nerve-wracking. If you’ve recently received a CP70 Notice, it’s likely that you’re curious (and maybe a little concerned) about what it means. Don’t worry, I’m here to help you understand what a CP70 Notice is, why you got it, and what steps you should take.

Why Did You Receive a CP70 Notice?

The CP70 Notice is issued by the IRS when they’ve used your federal tax refund to pay off a federal debt that you owe. Think of it like this: you were expecting a refund, but instead of giving you the money directly, the IRS used it to clear an outstanding debt that you had with a federal agency.

This isn’t the same as having your refund taken for a newly assessed tax debt. With a CP70, the debt was already on the books.

Common debts that can trigger a CP70 Notice include:

Past-due child support: If you owe back child support, your tax refund might be used to pay that debt.
Federal student loans: If you’ve defaulted on federal student loans, the government can take your refund.
Delinquent taxes from previous years: Although this is less common, if you owe back taxes from prior years, this could be the reason for the CP70. Usually for those types of debts, there would be a different notice.
Certain other federal agency debts: Various debts owed to the federal government, like some types of fines or penalties, can be a basis for a CP70.

Essentially, the CP70 Notice is a result of the Treasury Offset Program (TOP), which allows the government to collect debts you owe to federal and state agencies using your tax refund.

How Does the CP70 Notice Work?

The process behind the CP70 notice may seem complicated, but it can be broken down into a few simple steps:

You file your taxes: You go through the normal process of filing your federal income tax return.
The IRS processes your return: The IRS processes your return, and determines that you would normally be due a refund.
The Treasury Offset Program (TOP) kicks in: Before the IRS issues the refund, they check with the TOP to see if you have any outstanding federal debts. The TOP database includes debts from federal agencies and many state agencies.
Debt identified: If the TOP system identifies a debt for which you are liable, your refund may be offset.
The CP70 Notice is sent: If your refund is used to offset a debt, the IRS sends you a CP70 Notice explaining this action. The notice will tell you where the funds went and to which agency.
Debt is paid: The owed amount is paid to the agency to which you are indebted, and you will no longer owe the debt to that agency.

What Does the CP70 Notice Include?

The CP70 Notice is important because it explains where your refund went and why. It typically includes:

Your Name and Taxpayer Identification Number: Usually your social security number.
The tax year: The tax year for which you were due a refund.
The amount of the refund: How much your original refund was before it was offset.
The offset amount: The amount of your refund that was used to pay your debt.
The agency the payment was sent to: The specific federal agency that received your refund to pay off the debt.
The type of debt: What kind of debt (child support, student loan, etc.) it was for.
Contact information: How to reach the agency that received the payment if you have further questions about the debt.
Explanation of your rights: Your rights regarding the offset.

What Should You Do After Receiving a CP70 Notice?

When you get a CP70 Notice, it’s important to take action. Here’s a step-by-step guide:

Read the notice carefully: Don’t just skim it. Make sure you understand the amount that was offset, the agency that received the money, and what type of debt it was.
Contact the agency listed: If you have questions about the debt itself or believe there is an error, reach out to the federal agency that received the payment. Their contact information will be on the notice.
Verify the debt: Check your records to ensure that you actually owe the debt. If you believe that the debt is an error, be prepared to provide evidence to the agency.
Review your financial situation: Now that you know you have an outstanding debt, it’s a good time to review your financial situation and make a plan for paying any other debts you may have.
Plan for the future: Understand that if you owe money to the federal government, your future refunds might be subject to offset. Make an effort to pay these debts or at least make a plan for repayment.

Common Mistakes and Misconceptions About CP70 Notices

Ignoring the notice: The biggest mistake is to ignore the CP70 Notice. The debt isn’t going to go away on its own.
Assuming it’s a new tax debt: It is vital to remember that a CP70 Notice is not a notice of a new tax debt. It’s about an existing debt.
Not verifying the debt: Always verify that the debt is legitimate and accurate with the agency that received the funds.
Thinking it only happens once: Future tax refunds can be offset if you still owe a federal debt.
Confusing it with a tax levy: A tax levy is when the IRS seizes assets such as bank accounts. A CP70 offsets a refund; it is not a seizure of assets.

Related Tax Concepts

Understanding the CP70 Notice can also help you grasp other related tax concepts:

Tax Refund: The amount of money you receive back from the IRS when you overpay your taxes throughout the year. A CP70 will offset these funds.
Treasury Offset Program (TOP): This is the program that the government uses to collect debts using your tax refund.
Tax Levy: A more drastic step the IRS might take if you do not pay your tax debt. Levies can apply to assets, including real property, bank accounts, and wages.
Tax Debt: When you owe money to the IRS or other governmental agencies.
Past-due Debt: Money you owe to a creditor that is overdue. This can be either federal tax debt or debt to a federal agency.

Tips and Strategies for Avoiding Future CP70 Notices

Here are some tips to help you avoid getting a CP70 Notice in the future:

Pay your taxes on time: The best way to avoid tax issues is to file your taxes accurately and pay any tax due by the tax deadline.
Manage your debts: Stay on top of your other federal debts like student loans. This can help you avoid defaults that might trigger an offset.
Keep good records: Keep good records of all your financial transactions to verify accuracy of any information that may be sent to the IRS.
Communicate with the IRS: If you know you can’t pay a tax debt, contact the IRS as soon as possible. They offer options such as payment plans and Offers in Compromise that can help you avoid further issues.
Work with a professional: A tax professional can help you understand your tax situation and assist with any issues you might have with the IRS.

Final Thoughts

Receiving a CP70 Notice from the IRS can be unsettling, but it is not something to panic about. The CP70 Notice is not a notice of a new tax debt; it is notice of your refund being offset to pay off an existing federal debt. Understanding what it means, what steps to take, and how to avoid future notices can make managing your tax situation a lot easier.

Remember, the IRS isn’t your enemy. They just want to make sure that everyone is paying their fair share and that debts to the federal government are paid. By understanding notices like the CP70, you can ensure that your tax situation is always in order.

Recommended for You

Energy-Efficient Commercial Buildings Credit

The Energy-Efficient Commercial Buildings Credit incentivizes businesses to adopt sustainable building practices by providing tax benefits for energy-saving improvements.

Relief for Misinterpreted IRS Rules

Learn about relief options available for taxpayers affected by misinterpretations of IRS rules, and understand the process to address potential discrepancies effectively.

Write-Off

A write-off is a reduction in taxable income, often due to expenses or losses. Understanding write-offs can help lower your tax bill.

Business Office Soundproofing Costs Deduction

Business office soundproofing costs may be deductible for tax purposes, offering potential savings for companies improving workspace acoustics.

Translation Tools for Multinational Projects Deduction

Learn how translation tools used in multinational projects can qualify for tax deductions. Explore requirements for compliance and potential penalties for non-compliance.

Online Storefront Hosting Fees Deduction

Online Storefront Hosting Fees Deduction allows businesses to claim expenses incurred from hosting their e-commerce platforms as tax deductions, aiding in accurate financial reporting.

Community Safety Tax Credit

The Community Safety Tax Credit incentivizes investments in community safety projects by providing tax credits to taxpayers who contribute to eligible initiatives.

Waiver for Duplicate Trust Filings

A Waiver for Duplicate Trust Filings addresses situations where trusts inadvertently submit multiple filings. It aids in rectifying errors and avoiding duplicate efforts.

Coastal Renewable Workforce Expansion Job Credit

The Coastal Renewable Workforce Expansion Job Credit is a tax incentive designed to promote job creation in the renewable energy sector along coastal regions. It provides financial benefits to companies that expand their workforce, contributing to sustainable energy growth.

Redemption Fee

Redemption Fees are charges applied when shares in a mutual fund or other investment are sold or redeemed before a specified holding period. They play a crucial role in tax compliance.

Form 7004 – Application for Automatic Extension of Time to File Certain Business Income Tax Returns (highlighted earlier)

Form 7004 is an application for an automatic extension of time to file certain business income tax returns.

Business Payment Waiver Approval Form

The Business Payment Waiver Approval Form is essential for businesses seeking a waiver of penalties or fees related to tax payments, ensuring tax compliance and financial stability.

Environmental Hazard Liens

Environmental Hazard Liens are non-tax liens placed on properties affected by public health and environmental issues. They impact property sales and ownership rights.

Form 1120X – Amended U.S. Corporation Income Tax Return

Form 1120X is used to amend U.S. corporation income tax returns, allowing corrections to be made on previously filed returns.

CP03A Notice

A CP03A Notice from the IRS indicates that the agency needs more time to process your tax return. It’s not necessarily a bad sign, but it's important to understand what it means and how to handle it.

Statute of Limitations on IRS Collections

The Statute of Limitations on IRS Collections sets a time limit on how long the IRS has to collect unpaid taxes. This time limit can impact your tax obligations.

Public Solar Workforce Electrification Credit

The Public Solar Workforce Electrification Credit is a tax incentive designed to promote solar energy development while fostering workforce advancement.

Affordable Business Solar Integration Credit

The Affordable Business Solar Integration Credit incentivizes businesses to adopt solar energy, offering savings and promoting sustainability.

CP120 Notice

A CP120 notice from the IRS means they’ve made a change to your tax account, usually affecting your refund or balance due. Understanding it is key to avoiding further issues.

Relief for Incorrect Charitable Donation Reporting

Relief for Incorrect Charitable Donation Reporting refers to the IRS procedures that allow taxpayers to rectify errors made when reporting charitable contributions, ensuring compliance and minimizing penalties.