Don’t ignore it. Don’t throw it out. And, most importantly, if you get a letter from the IRS about your Earned Income Tax Credit (EITC), don’t panic.
The first thing to do is read the letter – it has all the information you need to clear up whatever the issue is – and sometimes the issue will be to your advantage. The letter will contain instructions about what to do. Make sure to follow them – they’re usually just asking for information or documentation from you. And make sure to respond by their due date – or you lose your chance to appeal their decision.
Chances are, you’ll be able to handle this on your own. Here are some basic guidelines that can help you sort this all out.
If your letter says you need to supply information to verify your claim:
When the IRS is looking into your tax return, your refund will be delayed until you clear up their questions. They usually send two types of notices when their questions involve the EITC: CP75 and CP75A. That code will appear on the top right corner of the IRS letter, and it means you have to provide some kind of supporting documentation to backup your claim for the EITC.
Right by that code, you’ll also see a tax year listed. That’s the year they need the information for. So if it says tax year 2015, it means 2015 – not the 2014 taxes you filed in 2015.
They will spell out exactly what documentation they need from you. Do not send any original documents to the IRS. Send them copies of the requested documents, and the problem will be cleared up quickly. Along with the letter, you most likely received Form 886-H-EIC, and that form lists the different documentation you can use to support your claim.
If your letter says the IRS made changes to your tax return that affected the EITC:
When the IRS thinks you made a mistake, they recalculate your tax return, which changes the amount of taxes you owe for the year. Just because they think you made a mistake doesn’t mean you did. And even if you did, that doesn’t mean you owe more money. Take a look at what they say went wrong, and compare it to your records. Once you know who made the mistake, you can figure out what to do next.
The most common reasons for the IRS to make this kind of change include
- Missing or incorrect Social Security number
- Your child’s too old to meet the requirements for a qualifying child
- Your tax return is missing a form
There are 4 basic notice codes that come with a change to your taxes. Basically, the IRS thinks you calculated your EITC incorrectly, each code explains the effect on your situation:
- CP10A: Changes how much will be applied to next year’s estimated taxes, meaning you may have to make up a shortfall to avoid an underpayment penalty.
- CP11A: The number they came up with means you owe taxes, and need to make a tax payment.
- CP12A: This one means you’ll be getting a different refund than you expected – but still a refund. That doesn’t mean you shouldn’t double-check their numbers to make sure you’re not getting shorted.
- CP13A: Zero. When the IRS “fixed” your mistake, you ended up with a zero balance – no refund, nothing to pay.
So what should you do if you don’t agree with the changes the IRS made? Take action. As soon as you know you disagree with their findings, contact the IRS immediately. The clock for disagreement runs out in 60 days, so don’t wait.
You can contact the IRS by either
- calling the phone number listed on your notice (top right corner), or
- sending a letter that includes justification for your position (missing paperwork, corrected information, etc.)
The most important thing to remember here is this: If you get a letter from the IRS, do not ignore it. Open it right away. Read it to see why they’ve contacted you, and whether you need to respond. Respond as quickly as possible to avoid losing your right to appeal their decision, and to avoid potential tax penalties.
And if you need help, ask. There are many free services that will help you deal with the IRS, starting with their Taxpayer Advocate Service.
You can also post your questions here, and I’ll do my best to answer them as soon as possible.