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Notice CP12 IRS Letter

Notice CP12

Austria
Simon Berger @8moments

Did you receive a notice CP12 from the IRS? If so, it's most likely due to an error or mistake on your latest tax return. Consequently, you are now either due a tax refund, your original refund amount has changed, or you now might owe income taxes.

Here are two sample CP12 Notices taxpayers received as a result of incorrect Recovery Rebate Credits (stimulus payments during 2020 and 2021) reported on their 2020 Tax Returns. In both of these cases, the IRS stated that the taxpayers had reported incorrect stimulus payments or Recovery Rebate Credit amounts on their respective tax returns. As a result, the tax over-payment amount is now smaller than the taxpayer expected or noticed on their tax return. In other words, many taxpayers saw their refund shrink or even turn from a refund into owing taxes. For example, if their refund was $500, but the IRS adjusted the second stimulus of $600 they claimed, this would have resulted in a total tax liability of $100.

Changes to Your Refund, Taxes Owed

Notice CP12 will detail a change in your tax liability as adjusted by the IRS - not by eFile.com or any other tax preparation platform. For tax returns filed or e-filed in 2021, many taxpayers received this notice explaining a reduction of their refund due to the calculation of the Recovery Rebate Credit on their 2020 Return. Taxpayers in 2022 are receiving this notice after filing their 2021 Return due to inaccurate entry of their third stimulus payment. Notice CP12 might list these reasons why your tax return results changed:

  • IRS: "The Social Security number of one or more individuals claimed as qualifying dependent(s) was missing or incomplete."
    • eFile.com response: This is not possible on an e-Filed tax return as a SSN has to be complete or can't be missing for a claimed dependent. This could only be the case on a paper based tax return.
  • IRS: "The last name of one more individuals claimed as a qualifying dependent does not match our (IRS) records."
    • eFile.com response: This is very unlikely with an e-Filed tax return as mis-matching names results in tax return rejections by the IRS unless the tax return gets corrected and re-efiled with the dependent's correct last name. On a paper based return, this could be more likely.
  • IRS: "One or more individuals claimed as qualifying dependents exceeds the age limit."
    • eFile.com response: This is possible; check here for stimulus payment related age limitations. If a taxpayer attempted to claim a stimulus credit for a dependent that was above the age threshold, then the IRS would have adjusted this upon receiving the return.
  • IRS: "The amount (Recovery Rebate Credit) was computed incorrectly (on the respective tax return)."
    • eFile.com response: This is the most common reason. Recovery Rebate Credit calculations are based on the data entered by the taxpayer. Calculation results have been tested, thus incorrect Recovery Rebate Credit amounts are not the result of incorrect calculations. For example, if a taxpayer claimed $0 (zero dollars) as Stimulus Payment 2, then eFile.com will have added the Recovery Rebate Credit amount of $1,400 per qualifying taxpayer to the Form 1040 based on that entry and other qualification parameters. This is shown on the Recovery Rebate Credit Worksheet. Or, a taxpayer might have claimed a dependent on a previous tax return - a tax return that was used to calculate a stimulus payment. Subsequently, a taxpayer either no longer claimed this dependent on a tax return or the dependent might no longer be eligible. This could also result in notice CP12.

Respond to Notice CP12

IRS Notice CP12 may require some attention, especially if your refund was changed into taxes owed. Please take these steps regarding Notice CP12:

    1. Read the content of the notice CP12 carefully so you know the purpose of the IRS tax return correction or adjustment.
    2. If the notice is about a Recovery Rebate Credit adjustment that resulted in a lower than expected tax refund or a higher than expected tax liability, go back and gather the exact payments you received for Stimulus 1, Stimulus 2, and/or Stimulus 3 from IRS Letters 1444, 1444B, and 1444C. Stimulus 1 and 2 are not part of the 2021 Return, but may be helpful in understanding the amounts you received.
    3. Then, sign in to your eFile.com tax return and double check if you entered the exact amount for Stimulus 3 on your 2021 Tax Return on the Recovery Rebate Credit page:
      • On the left side menu, click on Federal Taxes -> Review. On the right side page link, click I'd like to see the forms I've filled out or search for a form. Scroll to the Recovery Rebate Credit section and double check the amount you entered there. If they do not match what the IRS actually paid you in stimulus payments, the IRS Notice CP12 might be the result of that.
      • Important: The eFile app will calculate your Recovery Rebate Credit based on what you did or did not enter. If you report that you did not receive Stimulus 3, then eFile will calculate this on your return. If you did receive Stimulus 3, then the IRS will remove this credit from your refund.
    4. If you think one or more stimulus payment amounts you received are incorrect, verify your eligibility and payment amounts via these free eFile.com tools:
      • Stimulus 1 Calculator (Tax Return 2020 Recovery Rebate Credit if no or incorrect stimulus payment received).
      • Stimulus 2 Calculator (Tax Return 2020 Recovery Rebate Credit if no or incorrect stimulus payment received).
      • Stimulus 3 Calculator (Tax Return 2021 Recovery Rebate Credit if no or incorrect stimulus payment received).
    5. Review your appeal rights and steps to take to prepare a protest if you disagree with Notice CP12.
    6. If you think the IRS made a mistake by adjusting your tax return based on Notice CP12, either contact the IRS via the contact information listed on Notice CP12 or contact an eFile.com Taxpert® with questions you might have about a particular tax return you prepared and e-Filed via eFile.com.

Understand, review, and determine the steps to take if you receive IRS Notice CP12. Refer to your latest tax return copy in your eFile.com account under My Account or obtain a copy of your tax return to see the areas the IRS has adjusted. The notice will have a deadline to pay your new tax balance, if applicable, before tax penalties are applied.

IRS Notices, Letters

The IRS has a variety of notices or letters that they issue for specific reasons. Below, find an inclusive list of IRS letters you may receive with a brief description of each.

IRS Notice
Description
CP01 & CP303
IRS Notice CP01A contains your IRS IPPIN plus instructions on it. The various CP01 notices (CP01B, C, E, and H) contain information about how to verify your identity based on IRS records of your information, including your Social Security Number. You may receive one of these notices if someone filed a return with your information. CP303 may be issued if you or someone else used an IRS service with your information.
CP09
The IRS will issue you this notice if you may be eligible for the Earned Income Tax Credit, but did not claim it.
CP10-13 & CP16
These notices all indicate a change to your return, often as a result of a tax credit amount that was claimed. The various letters will show if your change results in a lower tax refund, a change in the amount of your refund applied to next year's taxes due, an unaffected tax balance, or if you now owe taxes.
CP14
This shows if you owe money for unpaid taxes (CP14), penalties (CP14H), or interest (CP14I).
CP21 & CP22
If the IRS made changes to your return as requested by you, they will issue CP21A, B, C, E, H, or I depending on the change (you now owe money, you are owed an additional refund, etc.). CP22A, E, H, and I serve the same purpose.
CP23
The IRS has determined that you over-reported the amount of estimated taxes you paid and you now owe money.
CP54
Additional information is required due to identity verification, included CP54E, G, and Q.
CP59
This is the first notice you will be issued if you were supposed to file a tax return, but did not.
CP75(A)
The IRS is auditing and holding your Earned Income Credit, Child Tax Credit, or Premium Tax Credit until you respond.
CP79
Further identity verification is needed to claim certain tax credits in the future.
CP90
CP91
CP297
CP298
The IRS intends to levy your assets or Social Security benefits due to unpaid taxes.
CP161
CP501
CP503
CP504
You have unpaid taxes or a balance due; this begins with CP161. If not paid or you do not respond, the IRS will issue CP501, 503, and 504 before issuing a levy.
CP523
Your installment agreement was defaulted; the IRS will levy your assets.
CP2000
Information on your return does not match information which the IRS received from third parties.
Letter 11
This is the final notice that the IRS will levy you assets; includes your rights to a hearing.
Letter 12C
Additional information is required before the IRS can process your return.
Letter 89C
The IRS has determined that you need to file an amended return.
Letter 525
The IRS has audited your return and summarized the adjustments via this letter.
Letter 531
The IRS has adjusted your return and additional taxes are owed.
Letter 2645C
The IRS is processing your correspondence after receiving it.
Letter 6419
Letter 6475

Each IRS notice or letter contains information on how to handle it, often including a specific number for you to call to speak to an IRS representative. Follow the instructions on the letter to rectify any changes or confirm any details the IRS is requesting as soon as possible.

If you have questions on a letter you do not understand and cannot reach the IRS, contact an eFile Taxpert® for help.

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