IRS Notice CP39: Why The IRS Won’t Give You Your Refund

Logan Allec, CPA

Founder of Choice Tax Relief · Over 140,000 YouTube subscribers covering IRS and state tax relief, unfiled tax returns strategies, and general tax strategy.

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IRS Notice CP39 is the notice the IRS sends to a taxpayer to inform them that their refund was applied to a previous outstanding balance. Instead of receiving a cash refund, it will be used as a credit and decrease any debt the taxpayer has.

Here is a redacted Notice CP39 that the IRS sent to one of our clients. 

IRS Notice CP39 At a Glance

Table Needed

IRS Notice CP39 Explained, Part by Part

Here is a full explanation of the Notice CP39, part by part.

Part 1: Notice of Changed Refund 

First, the IRS gives you a description of how much you owe it on your outstanding tax return.

If you have an outstanding balance already, any overpayment is automatically applied to the debt until it is paid off in full.

There will be a summary chart with the original amount owed, the overpayment, and the new balance. The new balance will also have a due date. It will be due about 20 days from the date of the notice.

Part 2: What the IRS Says You Need to Do

Next, the IRS will tell you what you need to do. They will need you to pay off your remaining balance within 20 days of the date of the notice. The IRS will then provide several options for payment, including the attached payment coupon or online at their website.

If you choose to pay by mail, you can pay by check or money order.

If you cannot afford to pay the balance, then there are several things you can do to work through your IRS debt. We’ll break them down in full later in the article.

Part 3: Where You Can Find More Information

Then, the IRS will give you some resources for more information. The most obvious would be their website, where they have a specific article on the CP39. We’ve linked that for you here.

You can also go to their website to learn about your taxpayer rights. If the online links aren’t enough, there is a provided phone number to call. If you choose to call them, then you need to make sure you have your account number on hand.

If you choose to mail something to the IRS, then make sure you have your TIN, tax year, and form number attached to the letter you’re writing.

Part 4: Payment Coupon

Next, the IRS will provide you with a payment coupon to pay off the remainder of your outstanding balance. It is due within 20 days of the original notice.

If you choose to pay via the coupon, take care to make sure you’re making the check or money order payable to the United States Treasury. You also need to include your SSN/TIN, the tax year you’re making a payment for, and the form number.

What You Should Do If You Receive a CP39

Below are steps for you to take after you receive a CP39 Notice from the IRS.

Step 1: Confirm You Actually Owe The IRS

The first thing you should do is to ensure you actually have an outstanding balance. The IRS makes mistakes, and it’s not wrong to double-check and make corrections if you find one.

The IRS is claiming you have an outstanding balance. Is that true? Did you already pay off your balance, and they just haven’t processed it?

The IRS is using your refund to pay off the balance. Is that correct? Do you have an outstanding balance already been paid off?

Look at your CP39 Notice closely. Check and check again to make sure everything is correct and that the IRS isn’t overcharging you. It is your right to make sure you’re protecting your account by staying vigilant.

Step 1a: Dispute the Charges if the IRS is Wrong

If there is an indisputable error in your CP39 Notice, contact the IRS as soon as possible. The best way to do so is through the phone number they provided. You’ll want to do things quickly since there are only 20 days from the notice date to pay off your outstanding balance.

The process of calling most likely won’t be easy. The likelihood of calling multiple times and telling the same story over and over again is quite high. Even though it’s difficult and annoying, the process is essential to make sure you’re doing the best for your account.

Since the process is exceptionally difficult, we will always call on behalf of our clients to make the process easier for them.

Step 2: If You Can Pay In Full, Do So

You will have 20 days from the date of the notice to pay off your balance; otherwise, penalty and interest fees will pile up.

If you need to dispute some of the charges with the IRS, again, do so as soon as possible. Time is the most important thing in matters like this. Contact them and start taking action as soon as possible.

If you find no errors and agree with what the IRS is saying, then the next step is to pay off your balance in full. It’s the quickest and easiest way to stop penalty fees from appearing and your refunds from being diverted.

While it may be the most obvious solution, it’s not a bad road to take.

Step 3: Seek Penalty Abatement From the IRS

If paying in full is out of the question, consider penalty abatement. Penalty abatement will allow you to appeal the IRS charges. It holds the possibility of reducing or even completely removing the outstanding balance on your account.

It’s always worth it to try, even if it’s not a certain outcome.

Choice Tax Relief will always attempt to seek some penalty abatement for our clients.

Step 4: Seek Tax Relief

Tax relief is always an option for taxpayers after they have tried all other options.

The most straightforward would be to enter an Installment Agreement. It allows taxpayers to pay in installment payments over an extended period of time. It allows the taxpayer to manage their debt in smaller increments.

Another solution is known as a temporary hardship placement (called currently not collectible status). A temporary hardship placement halts any IRS action while the taxpayer saves to prepare to pay off their debt. While it doesn’t make the debt go away completely, it helps give you some time to get back on your feet.

For some, the best offer is known as an offer in compromise (OIC). While it isn’t a solution for everyone, it’s effective. Essentially, the OIC allows you to settle your debt for less than you owe with the IRS.

Where to Go From Here

Having a refund applied to an old balance is often the first sign that the older debt needs a real plan behind it.

Once you know what the remaining balance is, an installment agreement or an offer in compromise can resolve it on terms you can live with.

We know how to deal with this the smart way, and you can start with a free consultation.

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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