Contributed by TriciaD, FreeTaxUSA Agent
It’s easy to get nervous when you receive a notice from the IRS, but there’s no need to be alarmed. Understanding the steps you should take and the options available can help you navigate this situation with ease.
Why did I receive a CP12 notice?
A CP12 notice means the IRS fixed an error on your tax return and changed your refund or balance due. A CP12 notice is not a penalty or audit, but a notice of changes to your return. Common reasons for a CP12 notice are:
- There is a math mistake or wrong amount on your return.
- A credit or deduction was claimed you did not qualify for or have proof of.
- Income was reported incorrectly or was left out.
- The wrong form or schedule was used for your situation.
One of the most frequent reasons for the IRS to issue a CP12 notice is the discovery of an error on Form 8812 or Form 5695.
What are Forms 8812 and 5695?
- Form 8812 is used to claim the Additional Child Tax Credit (ACTC).
- Form 5695 is used to claim the Residential Energy Credit.
Additional Child Tax Credit (ACTC)
The ACTC is a refundable credit you may claim if you have one or more qualifying children, and your income is low enough. To get the ACTC, you also need to claim the Child Tax Credit on your return and provide the Social Security number and birth date of each child who qualifies. The IRS may change your ACTC if there are mathematical errors, or missing information, or if a claimed child does not fulfill the qualification criteria.
For more details, see the Schedule 8812 instructions.
https://community.freetaxusa.com/kb/articles/76-what-is-the-difference-between-the-child-tax-credit-and-the-additional-child-tax-credit
Residential Energy Credit
The Residential Energy Credit is a nonrefundable credit available to taxpayers who have made energy-efficient improvements to their main home. This includes installation of items such as solar panels, central air, furnace, exterior doors, windows, geothermal heat pumps, and more. The IRS may adjust your Residential Energy Credit if you made a mistake in calculating the credit, or if you did not provide the necessary information or documentation to support your claim.
Refer to Publication 5797 for more information.
How do I respond to a CP12 notice?
A CP12 notice is not a cause for concern, but rather a chance to verify that you have reported your credits and deductions accurately. Here is what you need to do:
1. Read the notice and see how the IRS changes are different from the information on your tax return. The notice will give a detailed reason for the changes made by the IRS. This could involve changes to your income, deductions, or tax credits.
Information entered in your FreeTaxUSA account is used to fill out the forms included with your tax return. Follow these steps to review your entries:
- Form 8812, Additional Child Tax Credit
- Go to Personal > Dependents
- Select View next to the dependent(s)
- Review information entered for each dependent
- Form 5695, Residential Energy Credit
- Go to Deductions/Credits > Common Deductions/Credits > Home energy Credit
- Continue through the screens to view the information entered.
2. If you owe more taxes due to the suggested changes, the CP12 notice will tell you how to pay. It will give you a deadline and payment options.
3. You should contact the IRS within 60 days of receiving the notice if you have any objections to the suggested changes.
If you agree with the notice: No action is needed if you accept the IRS adjustments. If you are due a refund, it should arrive in four to six weeks from the notice date.
To dispute or question the notice: Reach out to the IRS as soon as possible. You can call the phone number shown on your notice or respond by mail to the address provided.
You should state why you disagree with the changes and give proof or documentation that backs up your case. It is also important to keep in your records a copy of the notice and any contact you have with the IRS.
