Taxpayer's Guide to IRS CP21A Notice
IRS data suggests that an overwhelming 16,978,533 errors were made on various tax returns in 2022. You may have received an IRS CP21 notice if you filed your return incorrectly and then provided the IRS with information that changes the details on your return as originally filed (generally through an amended tax return). However, if the IRS makes changes to a business tax return, the agency may be more likely to send you Notice CP210 or CP220.
This notice can be very confusing, especially when you don't remember initiating any changes to the IRS. However, it's critical to understand and address this appropriately. Ignoring this important notice could lead to problems with the IRS and additional financial penalties.
The good news is that we'll go over everything you need to know so that you can handle your IRS CP21A notice like a professional. Keep reading to learn more about these notices, what to do if you receive one, and how to proceed if you can't immediately pay off your full IRS tax bill.
What Is an IRS CP21A Notice?
You will receive a CP21 notice if the IRS makes changes to your tax return that result in a balance due on your part. Usually, the notice will say that the changes were initiated by you.
There are several different miscalculation notices such as the CP22A and CP11. Usually, the IRS sends CP21A or CP22A if you notified the IRS about changes, but the agency uses CP11 if the changes were due to correcting a math error on your account.
The notice will outline how much you owe and how to contact the IRS if you have questions or disagree with the changes made to your returns.
What to Do If You Receive a CP 21 Notice
If you receive this type of notice from the IRS, it's important to take it seriously. Read the whole letter carefully because it will describe why exactly the IRS determined that you owed more in taxes than you calculated when filing your returns.
Then, determine whether you agree with the IRS's changes. If you don't agree with the IRS's changes, your next step will be to appeal the decision. If you agree with the changes, however, your next step will be to determine your ability to pay. Find out more about each of these pathways below.
Know Your Right to Appeal
As you read through your CP 21, note where the IRS outlines what was changed and why. Although this notice contains changes initiated by the taxpayer, you may still disagree with the changes. In particular, you may not know which document led to the changes.
If you disagree with changes made by the IRS, then you're under no obligation to accept the changes. Instead, you always have the right to disagree or appeal the decision.
You should see a toll-free phone number at the top right corner of your notice. Call this number to speak with an agent about why you disagree with the IRS's changes. You can also call if you don't understand the changes that were made.
The agent on the phone will provide you with further details on how to proceed. Depending on your situation, the IRS may request additional documentation to prove why you disagree with the changes, or they may approve your decision to reverse the changes while on the phone.
What to Do If You Can’t Pay the Balance After a CP21 Notice
Another very common problem taxpayers face when they receive a CP 21 notice is not being able to come up with the money to pay off their balance right away. When you receive a CP21, the IRS generally expects you to be able to make payment in full right away.
If you can't, it's important to address the situation immediately. To do so, you'll want to contact the IRS. Below, we'll go over a few options available to taxpayers who can't make their payments in full right away.
IRS Payment Plans
One of the top ways to pay off a tax debt over time is to enter into a payment plan with the IRS. When you owe a debt to the IRS, they have an incentive to work with you even if you can’t pay your debt off in full at once. With an installment agreement, you agree to pay off the full balance of your debt over time and the IRS agrees not to pursue continued collection efforts unless you stop making payments.
Another way to handle your situation is to ask the IRS to put you under a hardship or uncollectible status. When taxpayers struggle financially and genuinely can't pay off their tax bill, the IRS won't worsen their financial situation. The IRS will usually only pursue collections when the taxpayer has the ability to pay but is willfully disobeying.
If you honestly don't have enough money to pay, consider contacting the IRS and inquiring about Status 53. Be prepared to prove your financial situation before requesting this status, though, because the IRS will do its due diligence and verify your ability to pay. You won't qualify if you have enough disposable income or assets that you can liquidate to pay your bill.
If you've missed the due date on your bill and have been hit with at least one penalty, you might consider filing for penalty abatement. This type of arrangement helps taxpayers waive some of the fees on their tax bill.
The IRS will not approve every penalty abatement request, though. In general, they’ll only waive fees when it’s your first time being hit with a penalty, you received incorrect or bad advice from the IRS, or you have a reasonable cause (death, serious illness, disaster, etc.) to have missed the deadline to pay off your tax burden or bill.
Innocent Spouse Relief
If you trusted your spouse in good faith to file your taxes jointly and they made a huge mistake or took on a huge tax burden that shouldn’t be attributed to you, then it might be possible for you to file for tax relief in the form of innocent spouse relief. To be eligible for this, though, the IRS must agree that it’s unfair to hold one spouse accountable for their former or current spouse’s tax burden.
Offer in Compromise Agreement
Do you owe the IRS a hefty amount on top of your recent CPA21 bill? You might be able to negotiate an offer in compromise agreement with the IRS. This arrangement allows the taxpayer to pay less than what they actually owe in exchange for a lump sum payment or installments over a 24-month period.
What Will Happen if You Ignore an IRS CP21A Notice
Too many taxpayers who can't afford the entirety of their tax bill right away make the choice to ignore the notice completely. The IRS will start charging you interest if you don't pay the full amount by the due date listed on the notice. On top of that, you'll likely get hit with a late payment penalty, too.
Those financial consequences might be the least of your worries if you ultimately wind up owing the IRS a significant amount of money. Under the law, the IRS has the authority to initiate several different types of collection efforts including garnishing your wages or even issuing a tax levy or lien on your property. The only way to avoid these consequences is to remain in good standing with the IRS even when you can't afford to pay off your tax burden in full.
How to Avoid a CP 21 Notice in the Future
Are you hoping to avoid receiving a CP 21 notice in the future? The best way to avoid experiencing something similar in the future is to ensure the accuracy of your tax returns every year before you file them. In most cases, it makes the most sense to file electronically using tax prep software or work with a tax professional. That way, you're less likely to make errors and get a CP21.
Additionally, if you know that someone is sending additional information to the IRS (such as a late W2 from an employer), figure out how the new information will affect the return that you filed. Then, prepare for the additional tax liability if relevant.
Do You Have More Tax Questions?
If you want to speak one-on-one with a tax professional, we'd love to help you get in touch with a tax professional in your local area who can help. Use TaxCure to search for a local tax pro, and then, filter your search results based on the specific tax problem you're having or the solution you want. That helps to ensure that you find a professional who's experienced with your specific concern.