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A CP16 Notice is good news and bad news. The IRS believes you made a mistake on your return and are entitled to a refund. But you owe taxes for a different year, so the IRS is keeping your refund to pay that debt.
How can you verify a CP16 Notice?
You will only receive a CP16 Notice if you owe the IRS money. In most cases, you should know that you do.
Your notice will look like this example on the IRS website. You can also go to irs.gov and look up the phone number to call. Never call the phone number on a notice you aren’t sure about because if it’s a fake, the number will go to the scammers.
Why did you get a CP16 Notice?
A CP16 Notice is usually the result of a math error or other miscalculation that led to you paying more taxes than you should have. The IRS computers double-check your math and will often automatically correct these types of errors.
You usually won’t get a CP16 notice because there was an additional deduction or credit you could have taken but didn’t. The IRS doesn’t have all the information it needs to check your eligibility, so you can often only find missed deductions or credits through your own research or with the help of a tax professional.
What can you do if you owed the IRS money?
If you owed the IRS money, the only thing you can do is be happy your tax debt is now unexpectedly smaller. You can almost never get back a refund that was applied to a tax debt.
You should also request a tax transcript or check your account online to see if you still owe money. If you do, it’s in your best interest to make payment arrangements with the IRS for the remaining balance. Interest and penalties will keep accruing if you wait for them to take your refund in future years.
If you know the IRS thinks you have an outstanding tax debt, but you think they’re wrong, you can’t fight the CP16 notice directly. Instead, you need to follow the process for fighting the notice that made you owe money. Check this list of IRS notices and how to fight them to learn more.
What should you do if you didn’t owe the IRS money?
If you didn’t owe the IRS money, you should immediately call them, request your account transcript, or view your account online to see what year they say you owed for. Potential reasons for tax debt you didn’t know about include:
- IRS errors.
- The notice is a fake.
- Someone filed a fraudulent tax return under your information.
- You never received previous notices or letters from the IRS telling you that you owed additional tax.
What should you do if you still have unpaid balances?
If you still have an outstanding balance, don’t wait for the IRS to take your next refund. You’re getting charged interest and penalties. If you can’t pay your entire tax balance now, request an installment agreement (payment plan) to help you pay it off.
If you got a CP16 Notice, there’s not much you can do to get your tax refund back if you did owe the IRS money. If you think you shouldn’t have had an additional tax debt, challenge the original reason the IRS charged you more. If you have outstanding debts, pay them off as soon as you can to reduce what you pay in penalties and interest.