Glossary

Tax Adjustment

A tax adjustment occurs when the IRS changes the information on a taxpayer’s return due to errors, discrepancies, or underreporting of income or deductions. Adjustments can result in an increase or decrease in the amount of tax owed, and they are typically triggered by:

IRS audits.
Underreported income detected through third-party reports (such as CP2000 Notices).
Mathematical or clerical errors on the tax return.

Taxpayers who receive a tax adjustment notice should review it carefully to ensure the IRS’s findings are accurate. If the taxpayer disagrees with the adjustment, they can file an appeal or request a reconsideration by providing documentation to support their original return.

Responding promptly to tax adjustment notices can help taxpayers avoid additional penalties and interest charges.

Recommendation

Notice of Federal Tax Lien (NFTL)

The IRS files a Notice of Federal Tax Lien (NFTL) to claim legal rights over a taxpayer’s property until the unpaid tax debt is satisfied.

Abatement

IRS Penalty Abatement reduces or eliminates penalties imposed for late filing or late payment, provided the taxpayer shows reasonable cause.

Federal Tax Deposit (FTD)

A Federal Tax Deposit (FTD) is a payment made to the IRS by employers to cover payroll taxes, including income tax withholdings, Social Security, and Medicare taxes.

IRS Form 941: Employer’s Quarterly Federal Tax Return

IRS Form 941 is filed quarterly by employers to report wages, tax withholdings, and payments for Social Security and Medicare taxes.

CP09 Notice: Earned Income Credit Eligibility

The IRS CP09 Notice alerts taxpayers that they may qualify for the Earned Income Credit and invites them to claim it if eligible.

CP49 Notice: Refund Applied to Other Federal Debts

The IRS CP49 Notice notifies taxpayers that their refund has been applied to federal debts other than taxes, such as student loans or federal benefit overpayments.

CP89 Notice

The CP89 notice notifies taxpayers of a change in their tax account status, typically due to errors or adjustments made by the IRS.

CP05B Notice: Delayed Refund Processing

The IRS CP05B Notice alerts taxpayers that their refund is delayed due to an ongoing review of their tax return.

CP05A Notice: Information Verification Needed

The IRS CP05A Notice requests additional information from taxpayers to verify entries on their tax return before the refund can be issued.

Reasonable Collection Potential (RCP)

Reasonable Collection Potential (RCP) is the IRS’s estimate of how much a taxpayer can pay toward their tax debt through liquid assets and future income.