Receiving a notice from the IRS can and often does incite an immediate feeling of worry, even if the notice is as seemingly benign as the IRS Notice CP12. This notice may indicate that you’ve overpaid taxes and you’re entitled to a larger refund. It may sound too good to be true, so it’s important to understand what this means and how exactly you should respond. In this article, we’ll dive into the intricacies of Notice CP12, overpaid taxes, and the next steps you should take.
What Exactly is Notice CP12?
Notice CP12 is a document you receive from the IRS when they’ve discovered that you’ve overpaid your federal taxes. Essentially, the IRS is notifying you that you’re legally owed more money than you originally anticipated on your tax refund. On the contrary, if you owed the IRS, this overpayment could potentially cancel out your tax liabilities.
Reasons for an Overpayment
There could be numerous reasons for an overpayment, which usually stem from a variety of common mistakes made when filing taxes. These could include simple arithmetic errors, not accounting for certain deductions, or misinterpretation of tax laws.
How the IRS Determines Overpayment
The IRS checks the math on every return processed. With an army of computers and advanced algorithms, they can quickly and precisely find discrepancies in your filed return. When they discover an overpayment, they adjust your return to correct it, resulting in the creation and dispatch of Notice CP12.
The Role of Tax Software
Interestingly, if you’re using tax software to prepare your return, you’re somewhat less likely to have these sorts of arithmetic mistakes, as the software’s built-in checks and balances can quite often correct human error.
What To Do When You Receive Notice CP12?
- Firstly, compare the notice to your own records and your tax return.
- Upon agreement with the changes, you don’t need to do anything unless a payment is due. The IRS will adjust your account and send you a refund.
- If you don’t agree with the changes, it’s vital you contact the IRS. Ensure you have documentation and a clear explanation of why you believe there is an error.
Frequently Asked Questions
Is a Notice CP12 bad?
Not at all! Though it might initially seem alarming to receive a notice from the IRS, a CP12 notice is actually good news. It simply means that you’ve overpaid on your taxes and are therefore due for an additional refund.
What happens if I disagree with the IRS’s changes?
If you disagree with the changes outlined in your CP12 notice, you have 60 days to contact the IRS. They will provide instructions to guide you through the process.
Hopefully, you’re feeling more confident about handling a CP12 Notice from the IRS. Remember that tax situations can be complicated and sometimes require professional assistance. Reach out to tax advisors or professionals for guidance when necessary. It’s essential to understand that when dealing with taxes, taking the correct steps early on can save you potential headaches in the future.