IRS Notice CP05: Why Is The IRS Holding Your Refund
IRS Notice CP05 is the notice the IRS sends to a taxpayer to inform them that the IRS needs more time to review their recently filed tax return.
If you receive this notice, it means that the IRS needs extra time to verify the accuracy of one or more of the following items on your tax return:
- Your income
- Your income tax withholding
- Your credits
- Your expenses
If your return indicated a refund due to you, you will have to wait until the IRS completes its review before you receive your refund.
Here is a redacted Notice CP05 that the IRS sent to one of our clients.
Table of Contents
IRS Notice CP05 At a Glance
Notice Type: Return Processing Generated By: IRS Accounts Management Preceded By: Filing of Tax Return Recommended Action: Wait For Further Correspondence From IRS
Why the IRS Is Holding Your Refund
Any of the following issues can trigger an IRS refund hold along with the issuance of Notice CP05:
- Mismatch in income reported on your tax return vs. income reported to the IRS on forms such as 1099s, W-2s, etc.
- Claiming certain credits that are subject to abuse such as the Earned Income Tax Credit and the Additional Child Tax Credit
- Claiming large business losses
- Identity theft issues
Note that this is list is not exhaustive.
Unfortunately, the CP05 Notice will not tell you what the specific issue is that the IRS is questioning about your return.
IRS Notice CP05 Explained, Part by Part
Here is a full explanation of the Notice CP05, part by part.
Part 1: What The IRS Needs You To Know
First, the IRS will tell you they’re reviewing the return for accuracy. If you have filed your return on time, there are no further steps for you to take. The IRS will send you one of three responses when it finishes.
These include:
- Sending you a refund for your tax withholdings.
- Asking for additional information to continue processing your return.
- Deny part or all of your refund. If you disagree with the denial, you can appeal.
A complete review can take up to 60 days to process. If 60 days have passed, then you can go forward and contact the IRS. You can also check your refund status online if you have further questions.
Part 2: What the IRS Says You Need to Do
There isn’t anything for you to do if you’ve filed your tax return. However, if you haven’t filed, but received the notice anyway, there is cause for concern.
This means that someone has most likely attempted to use your personal information to steal your tax refund. In this case, you should complete and sign a Form 14039. This is an Identity Theft Affidavit, which will alert the IRS to the identity theft.
Once the form is filled out, mail it to the return address at the top of the notice.
Part 3: Where You Can Find More Information
Obviously, the IRS website has the most information on the CP05. Their website has a dedicated article we’ve linked here.
If you need more information on identity protection, the IRS has information on its website here. The information covers their IRS Identity Protection PIN, which is put in place to prevent misuse of taxpayer ID numbers on income tax returns.
There are also sources for Taxpayer rights under the Internal Revenue Code, found under Section 7803(a)(3).
There is also the Taxpayer Advocate Service (TAS), which operates to protect taxpayers and represent them to the IRS. They’re an independent organization within the IRS.
Lastly, independent organizations like Choice Tax Relief are available to provide any support away from the IRS.
What You Should Do If You Receive a CP05
Below are steps for you to take after you receive a CP05 Notice from the IRS.
Step 1: Do Nothing
You don’t have to do anything if you receive this notice after filing your tax returns.
Step 2: Follow Through If Your Identity Is Stolen
Like we said before, file a Form 14039 and report the incident to the IRS. Continue following up with them, and take all necessary steps to ensure your identity is protected.
Author:
Logan Allec, CPA, Founder and Owner
Logan Allec has been serving taxpayers as a CPA for over 14 years. After leaving his role at a "Big 4" firm, he started Choice Tax Relief to help everyday Americans who have found themselves behind on their taxes. He also educates thousands of people daily about tax relief on his YouTube channel. In addition to his CPA license, Logan also has a Master's Degree in Taxation from the University of Southern California (USC). He lives with his wife and children in the Los Angeles area. Learn more about Logan here.
