IRS Letter 12C (officially labeled LTR0012C) is a notice that the IRS needs more information before it can process your return. The most common reason is a missing form.
Why does the IRS send letter 12C?
The IRS sends this letter for three reasons.
- Missing forms or schedules on an individual tax return.
- Verification of income, withholding, or credit amounts. For example, a missing W-2.
- Documentation needed to reconcile advance payments of the Premium Tax Credit (Obamacare subsidy).
The letter does not mean you did or did not correctly calculate your taxes. It simply means the IRS needs more information to verify your Form 1040 individual income tax return.
In some cases, you may also receive IRS Notice 1445 which simply tells you how to get help in another language.
What should you do in response to Letter 12C?
The IRS will tell you exactly what information they need. This might be a form you receive from an employer or health insurance provider, or it could be a form or schedule you were supposed to complete when you filed.
There are three general outcomes.
- You track down the requested forms and they exactly match your tax return, so there should be no changes to your taxes owed.
- The documents don’t match your tax return, so the IRS will recalculate your taxes owed. If you underpaid, interest and penalties may be added.
- You can’t find the requested information, which may lead to the IRS disallowing deductions or credits, using its own calculations, or performing an audit.
If you’re in the first category, it’s probably safe to return the required forms as instructed in the letter. If not, you may wish to seek professional advice about whether you can avoid penalties and how to support your tax return.
Premium Tax Credit Issues
The IRS is often very strict about the premium tax credit. It will usually only go by your 1095-A even if you can clearly show that your 1095-A is incorrect.
You will need to get a new health insurance marketplace statement showing the correct information for the IRS to process your tax return.
Should you file an amended tax return?
The IRS generally recommends that you do not file an amended tax return. It will make any necessary adjustments to your original return based on the information you provide.
However, if you discover additional errors or find that the information substantially changes your tax return, it may be in your best interest to go ahead and amend your return.
What happens if the amount you owe changes?
If the amount you owe changes, the IRS will send you a bill. You have several options depending on whether you agree or disagree with what you owe.
If you underpaid your tax, interest and penalties will usually apply from the original due date of the return. To reduce the penalties and interest you’ll have to pay, make payment arrangements as soon as possible.
How long do you have to respond to Letter 12C?
The deadline to respond is generally 20 days from the date on the top of the letter. Check the specific instructions in your letter. Where to send your response can vary based on where you live, so be sure to use the mailing address or fax number on the letter you got from the IRS rather than looking it up online.
If you disagree with the letter, are unsure how to respond, or believe it may lead to penalties, you should contact an Enrolled Agent or other tax professional immediately.
If you ignore the letter, you might find yourself faced with a certified letter from the IRS.
How long does it take the IRS to respond?
When you respond to an IRS letter, they will usually review your response in six to eight weeks. However, many taxpayers have been reporting that they are taking much longer to respond recently.