If you received a CP49 Notice from the IRS, it means they’re keeping the refund you claimed on your tax return to pay an outstanding balance from a different tax year.
Why Did You Receive a IRS Notice CP49?
When you filed your latest income tax return, you calculated that you should get a tax refund. However, the IRS says you have an unpaid tax debt from a previous tax year.
The IRS uses a CP49 notice as a notice of a tax refund applied to back taxes. It tells you not to expect a refund check or direct deposit or that your refund will be smaller. Instead, the IRS used that money to pay down your balance due.
This is not an IRS notice of an audit or a proposed adjustment to what you reported on your tax return. You might get Notice CP49 after an audit, but the IRS has already determined what you owe.
What to Do if You Owed the IRS Money
If you owed back taxes, there’s not much you can do. The IRS will keep your tax refund in virtually all situations. They’ll keep taking your future refunds until you’ve paid off the full amount you owe.
If you have a hardship or other unique circumstances, talk to a tax professional to see if you have any available options.
You should also request a tax transcript or check your account online to see if you still owe back taxes. If you still have a tax debt, you should pay the balance due as soon as possible to reduce your penalties and interest as well as other potential tax problems.
If you can’t pay the full amount you owe, you may want to set up a payment plan (installment agreement) with the IRS for the remaining balance. A payment plan lets you pay your taxes over time and limits what collections actions the IRS will take against you.
Interest and penalties will keep accruing if you wait for them to take your tax refund in future years. You may also face a possible federal tax lien if you owe too much for too long.
What to Do if You Disagree That You Owe Money
A CP49 Notice isn’t the notice that says you owe the IRS money. It says that they’re taking your tax refund because you previously got a notice that you owe back taxes.
If you don’t think you should owe money, you generally need to challenge the previous notice.
For example, you got a CP2000 notice last year saying you owe $1,000 more. This year, you got a CP49 notice saying your refund was applied to that unpaid balance. If you disagree that you owed the $1,000, you challenge the CP2000 rather than the CP49.
If you didn’t respond to the previous notice by the deadline, contact a tax professional such as an Enrolled Agent. There are often other ways to appeal the notice or have the IRS take a second look at your tax return.
What to 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 tax year they say you owed for and the balance due.
Potential reasons for an unexpected CP49 Notice include:
- IRS errors.
- The notice is fake.
- Identity theft like someone filing a fraudulent tax return under your information.
- You never received previous notices or letters from the IRS telling you that you owed additional tax.
Your options will vary based on what caused the CP49. You don’t fight the CP49 directly but instead have to challenge the original IRS notice or IRS letter that led to the tax debt.
You can see a list of IRS notices and letters and how to challenge them here. You may also wish to get help from a tax professional instead.
What if My Spouse Owes Money But I Don’t?
In some situations, you may be entitled to receive your portion of the refund from a joint tax return. This can apply when your current or former spouse was individually responsible for back taxes.
See Injured Spouse Allocation or Innocent Spouse Relief for more information.
Where is My CP49 Refund?
If the IRS seized part of your refund, you will still get the rest of your refund amount as long as you don’t have an additional unpaid balance.
You can check your online IRS account to see what you’re owed and if they’ve sent a payment.
How to Stop the IRS From Taking Your Refund in the Future
The only way to stop the Internal Revenue Service from taking your tax refund if you have an unpaid balance is to avoid needing a refund. You will need to adjust your withholding or estimated tax payments early in the year to ensure that you will owe a small balance when it’s time to file your return.
To avoid future tax issues, you may want to have a tax professional help you file your future tax returns, make sure you’re paying enough in taxes, and resolve any remaining tax debts.
How to Verify a CP49 Notice
You will only receive IRS Notice CP49 if you owe the IRS back taxes. In most cases, you should already know that you do.
A real notice should have your Social Security Number or at least the last four digits. However, it is possible for scammers to have stolen your Social Security Number.
You can also go to irs.gov and look up the phone number to call. Never call the phone number on an IRS notice you aren’t sure about, because if it’s a fake, the number will go to the scammers.
Related: CP12 Notice, CP2000 Notice