IRS Notice CP21B Explained: What It Is and What To Do

IRS Notice CP21B is a notice from the IRS to a taxpayer that the IRS has made the changes to a given tax year that the taxpayer requested, and the taxpayer is now owed a refund.

These changes could be the result of:

• Convincing the IRS that the taxpayer did actually have tens of thousands of dollars of federal income tax withheld from their wages (contrary to the IRS’s original position), as we did for our client who received this Notice CP21B.
• Requesting — and being approved for — penalty abatement.
• Numerous other things.

IRS Notice CP21B At a Glance

IRS Notice CP21B Explained, Part by Part

Here is a full explanation of the Notice CP21B, part by part.

Part 1: Refund Summary

On the first page of the Notice CP21B, you’ll see a reconciliation to the amount of the refund check the IRS is intending to send you based on the changes you requested.

Regardless of the changed you requested, the first line in this refund summary will be your “account balance before this change”; this was your official account balance per the IRS’s records before you requested the change to this tax year and the IRS approved it.

Then, you’ll see a line (or multiple lines) indicating changes due to whatever change you requested on your account.

For example, for the taxpayer whose Notice CP21B we’re using as an example in this article, this line says, “Increase in credit for tax withheld.” This is because the change we requested the IRS make to his account was for the IRS to accurately credit him for the income tax withholding from his W-2 wages.

It’s also likely that due to the changes the IRS made to your account resulting in a refund the IRS will reduce your penalties and interest since your penalties and interest are calculated based on your balance due; this is why you may see lines such as the following:

• Decrease in failure-to-file penalty: This penalty is assessed due to a taxpayer failing to file their tax return by its deadline (or extended deadline if they filed a valid extension). It is calculated as five percent of your balance due per the return (when it’s eventually filed), up to a maximum of 25%.
• Decrease in failure-to-pay penalty: This penalty is assessed due to a taxpayer failing to pay their taxes by the payment deadline. It is calculated as half a percent of the amount owed, up to a maximum of 25%.
• Decrease in interest: IRS interest is calculated on your total balance (including penalties and interest) and is compounded daily.

Part 2: What You Need to Do

Next, the IRS tells you what you need to do depending on whether you agree or disagree with the refund amount reconciled in your billing summary.

If you agree with the refund amount, then all you have to do is sit back and wait for the refund check to arrive.

If you don’t agree with the refund amount, the IRS instructs you to call a phone number to discuss your account with a representative.

Part 3: Penalties

Next, the IRS breaks down for you the penalties indicated previously on your notice.

Part 4: Additional Information

Finally, at the end of the CP21B Notice, the IRS provides some additional information, such as:

• The official IRS webpage for the CP21B Notice
• Where you can obtains tax forms, instructions, and publications
• How to contact the IRS
• That you should keep this notice for your records

Why the IRS Sends Notice CP71B

The IRS sends Notice CP71B to inform a taxpayer that the IRS has determined they are due a refund due to the IRS approving changes that the taxpayer requested be made for a particular tax year.

What to Do If You Received Notice CP71B From the IRS

If you received a Notice CP71B from the IRS, the first thing you should do is compare the refund summary at the top of the notice to your own calculation of what the IRS owes you.

If you agree with this amount, all you have to do is await your refund check.

If you disagree with this amount, be able to articulate why you disagree, and call the number in the “What you need to do” section to discuss the situation with the IRS.

Author:

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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.

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