CP12 Notice: IRS Changed Your Return and Your Refund

A CP12 is the IRS telling you it corrected one or more mistakes on your return and, as a result, your refund is not what you expected. The refund may be larger or smaller than you computed, or you may be due a refund when you thought you owed money or had an even balance. Many people are relieved by this notice. It is still worth reading closely.

Why it happens

The IRS reviews returns as it processes them. When it finds an error, such as a wrong figure carried from one line to another or an amount that does not agree with its records, it corrects the return and explains the change. The notice has a section called "What we changed on your return," and a section called "Where to find more information" with a phone number.

A CP12 can cut either way. Sometimes the IRS finds a credit you missed and your refund goes up. Sometimes it removes an amount you claimed and your refund goes down. Check the direction before you decide anything.

If you agree

You do not have to reply. You can update your own copy of the return, but do not send it to the IRS. Track the refund using the IRS refund tools. If you agree and another notice later asks for money, read it separately.

If you disagree

Call the toll-free number on the notice by the date shown. The IRS says the phone is the fastest way to resolve many return errors. If the IRS needs a missing or corrected document, you can fax it during the call.

Two points from the IRS are worth knowing:

• Reversals. Most changes that reduced the refund you requested will be reversed on request. You do not need to explain, though supporting information can speed up the case.
• Audit risk. If the IRS does not receive information supporting your original return, it may send the case for audit. The IRS says audit staff would contact you within about six weeks to explain the process and your rights.

When the change is in your favor

A larger refund is not automatically a problem, but if the notice looks wrong even in your favor, use the contact route. A refund you were not entitled to can lead to a bill later, with interest. Compare the "What we changed" section with your return and with your source documents before depositing the money and assuming the matter is closed.

Example (hypothetical)

A taxpayer computes a $1,000 refund. The IRS notices a withholding figure on the return is $200 lower than the W-2 shows and corrects it, sending a notice that the refund is now $1,200. The taxpayer agrees and does nothing. Had the W-2 been wrong, a call by the notice date would have been the time to say so.

Common mistakes

• Treating the notice as irrelevant because there is no balance. The correction may be wrong.
• Sending a corrected return rather than calling.
• Not updating your records, which can repeat the error next year.
• Assuming the refund will arrive in a week. The IRS gives a 4 to 6 week window.
• Overlooking a debt offset. If you owe other taxes or debts the IRS must collect, the refund may be reduced. See CP49.

When to involve a CPA

Ask a CPA to compare the IRS's changes with your return if the amounts are large, if a credit or dependent changed, or if you are unsure the IRS has the right information. We can pull your tax transcripts and, with a signed Form 2848, contact the IRS for you. To avoid a repeat next year, correct your own copy of the return, tell your preparer, and consider e-filing, which the IRS says reduces errors.

How we can help

We can review the CP12, confirm the correction against your documents, and handle the call or response if the IRS has it wrong. See our IRS representation services or contact us.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.