IRS Notice CP49 Explained: What It Is and What To Do

IRS Notice CP49 is a notice that the IRS sends to taxpayers to inform them that it has applied all or part of the taxpayer’s refund for a recently filed tax return to the taxpayer’s balance for another year (or years).

Here is a redacted Notice CP49 that the IRS sent one of our clients.

IRS Notice CP49 At a Glance

IRS Notice CP49 Explained, Part by Part

Here is a full explanation of the Notice CP49, part by part.

Part 1: Billing Summary

At the top of the first page of Notice CP49, the IRS tells you:

• The amount of the overpayment from the return you just filed that was applied to a different tax year (in the example billing summary above, this amount is $410.00 from our client’s recently filed 2023 tax return)
• The remaining amount due for the year to which the overpayment was applied (in the example billing summary above, this amount is $1,583,045.37 for our client’s 2015 tax year)

Part 2: Payment Coupon

At the bottom of the first page of the Notice CP49 is the payment coupon that you would submit with your payment if you intend to pay the amount on the notice in full or in part via paper mail.

Part 3: What the IRS Want You to Do Now

Then, the IRS tells you what it wants you to do immediately — pay the amount it believes you owe.

The notice does remind you that if you are in currently not collectible (CNC) status and your financial situation has not changed since you were placed into this status that you do not need to do anything — including paying the IRS — in response to receiving the CP49 Notice.

You are also informed that if you disagree with the amount the IRS claims you owe, you can call 800-829-8374 to discuss the issue with an IRS representative.

This section also includes some information for those who are in bankruptcy — the IRS reminds such taxpayers that if they are in bankruptcy and received Notice CP49 that the notice is informational and they are not required to pay.

This is because once someone files for bankruptcy, their debts are then immediately subject to the “automatic stay” provided by the bankruptcy code, meaning that — absent a court order — creditors can no longer attempt to collect debts from the debtor while the automatic stay is in effect.

Part 4: Payment Options

The next part of your Notice CP49 talks a bit about the methods by which you can pay your tax bill.

And importantly, the IRS states that if you can’t pay your balance in full now, you still have some options.

Installment agreement, offer-in-compromise, and a temporary collection delay could be eligible avenues for you to explore, depending on your circumstances.

Part 5: What the IRS Says It Will Do If It Doesn’t Hear From You

Finally, the IRS stresses that it may charge you additional interest and penalties if you don’t pay the amount stated in full by the date indicated in the notice.

Part 6: Additional Information

Next, the IRS provides some additional information, such as:

• The official IRS webpage for the CP49 Notice
• Where to obtain tax forms, instructions, and publications
• That you can pay your federal taxes online at www.irs.gov/payments
• Where and how to contact the IRS by mail concerning this issue
• That you should keep the Notice CP49 you received for your records

Why the IRS Sends Notice CP49

The IRS sends Notice CP49 to inform a taxpayer that their overpayment from one tax year was applied to their balance for another tax year.

What You Should Do If You Receive a Notice CP49

If you received a Notice CP49, this means that you have an outstanding balance with the IRS — and you should do something about it.

Below are the steps you should take after you receive a CP49 Notice.

For more information about each of these steps, check out our article How to Fight the IRS and Win.

Step 1: Check the CP49 Notice for accuracy.

Don’t assume that the IRS did their math correctly — review the IRS’s numbers against your own.

Step 2: Correct any errors with the IRS.

If you do find an error in the IRS’s math, take it up with them.

There should be phone numbers in the CP49 Notice itself that you can call to discuss your disagreement with the IRS’s numbers.

You can always reach out to us at at 866-8000-TAX to go to bat against the IRS for you.

Step 3: Seek Penalty Abatement.

For most of our clients with penalties on their account, we at least seek some sort of penalty relief for them.

Sometimes the IRS grants it; sometimes they don’t.

But it’s generally at least worth a shot.

For more information about seeking abatement for the penalties on your account, check out this article.

Step 4: Pay the Balance Due OR Seek Tax Relief

Finally, you have to figure out what to do with the amount you owe the IRS after you’ve cleared up any disagreements with them concerning the amount as well as obtained any possible penalty relief for your account.

You can, of course, pay off your balance in full.  This will (obviously) stop future penalties and interest from accruing.

However, a better option — if you qualify for it — is an offer in compromise.  An offer in compromise is an agreement you make with the IRS in which the IRS agrees to accept a lower amount to satisfy your tax debt than you actually owe.

That said, not all taxpayers qualify for an offer in compromise, so there are other options, such as a temporary hardship placement called currently not collectible status as well as installment agreements for taxpayers who wish to pay their balance over time.

For an overview of how tax relief works, read our article What Is Tax Relief and How Does It Work?.

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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