What to Do If the IRS Adjusted Your Refund?

If you were expecting a larger refund from the IRS this year and received a notification that your refund has been adjusted, you may be wondering what to do next. Don’t worry, you’re not alone. According to the IRS, around 1.1 million taxpayers had their refunds adjusted this year. In this blog post, we will provide some guidance on what to do if the IRS adjusts your refund.

Why Does the IRS Adjust Refunds?

In order to understand adjusted refunds, you have to understand that the IRS receives information from multiple sources for your tax return. Your W2s, 1099s, 1095s and other forms are sent to the IRS from the same entities that send them to you, so your tax return is supposed to match those. If they don’t, the IRS typically adjusts the tax return to match the information. With that said, the last two years have been special, to say the least.

Because of new laws and forms regarding the recovery rebate (stimulus) and child tax credits, more taxpayers than usual have been in a position where information doesn’t match.

For example, in 2021, there was one stimulus payment of $1400 for each individual (including dependents) to account for. However, for some people, a check was mailed, but never received or cashed. If the IRS sent it out, they will have adjusted the refund to account for it. 

In cases like these, speak to a tax professional to help navigate this situation and provide the best outcome. You may need to initiate an investigation to receive the funds that are due to you, and they can help you do so.

What To Do If You Get a Notice From the IRS?

When you get a notice, it is important to stay calm and take the time to really understand what the IRS is asking for or proposing. It can be as simple as an identity verification, an income verification, or a request for more information to finish processing the return. However, proposed changes to the return you filed, adjusting the amount you owe, or your refund can be complicated and confusing.

Bottom line, either hire a professional to help you decipher what it is the IRS is asking for, or contact the IRS after carefully reading through the notice.

For example, identity verification can be done over the phone if you’re able to answer certain personal questions, and original copies of requested income documents can be mailed or faxed. However, more complex situations may call for a professional touch.

What To Do If Your Refund Has Been Adjusted?

If your refund has been adjusted, it is important to look at the details on the notice, as it can be very confusing. There are typically a lot of numbers shown regarding the taxes owed, payments made (which include withholding), and credits, which may not make sense if you don’t know what you’re looking for.

For example, a CP2000 notice proposes changes to your refund, but doesn’t give a simple view of what they changed or how to change it. It is very simple, however, to agree with the changes and make a payment, if applicable. 

If you don’t agree with the changes, or need to investigate your situation further, hiring a professional should be a serious consideration. Tax professionals with the right credentials (EA or CPA) can speak with the IRS and help you figure out the best course of action to move forward.

Responding To The IRS

Responding to the IRS can be very simple, if you understand and agree with the information on the notice. Usually there is a check mark and response form, and if you miss the timeframe to respond, they process as though you accepted the changes.

Responding to the IRS can be very simple, if you understand and agree with the information on the notice. Usually there is a check mark and response form, and if you miss the timeframe to respond, they process as though you accepted the changes. 

If you do not agree, you have to make sure that you respond and let them know that you disagree within the given timeframe on the notice. Remember that some of these notices are proposed changes, so nothing has been finalized yet.

However, if you are having trouble understanding the notice, you can always call the number on the notice to get more information before responding.

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At the end of the day, the result of responding to the IRS depends greatly on understanding what is being reported and requested. So there’s no better way to do so than to hire a tax expert with experience in speaking with the IRS regarding these notices. You can save yourself time, frustration and money by having the right person represent you.

Contact DH Financial for a complimentary consultation with such a tax expert
and don’t go it alone!
https://calendly.com/dhfinancial/complimentary-consultation

Resources

https://www.irs.gov/pub/irs-utl/oc-respond-to-irs-notices.pdf

https://www.irs.gov/individuals/understanding-your-irs-notice-or-letter