What to Do If You Receive IRS Notice CP75
Taxpayers' Guide to IRS Notice CP75 (Exam Initial Contact)
If you receive Notice CP75, it just means that the IRS wants more information about some of the details on your tax return. The IRS uses this notice to request proof related to the Earned Income Tax Credit (EITC), the American Opportunity Tax Credit (AOTC), the Premium Tax Credit (PTC), and the Child and Dependent Care Tax Credit. The agency may also request information about other details related to these credits.
If you receive Notice CP75, do not ignore it. Ignoring this notice can reduce your refund or increase your tax liability. Keep reading to learn how to respond to this IRS notice or contact a tax professional for help today.
Why Did I Receive Notice CP75?
You may have received Notice CP75 for any of the following reasons:
- The IRS wants documents to support information related to a tax credit you have claimed.
- The IRS wants more information about the business income you have reported to substantiate your eligibility for a tax credit.
- The IRS wants more information about the dependents you have claimed credits in relation to.
- The IRS has received another return claiming the same dependents listed on your return.
- The IRS has received documents from third parties that contradict the information on your return.
- The IRS has other reasons to believe that you may not be eligible for a certain tax credit.
- The IRS has randomly selected your return for a partial audit.
Notice CP75 is called an Exam Initial Contact Letter. This simply means that the IRS is examining part of your return, and this is the first contact. You need to respond — this is not a notice that the IRS sends repeatedly.
Do I Need to Respond to Notice CP75?
If you want to claim the credit on your tax return, you need to respond to this notice. The IRS may disallow the credit if you don't respond. You can ignore this notice if you've changed your mind and you no longer want to receive the credit.
For example, imagine you received Notice CP75 about the American Opportunity Tax Credit. If you still want to claim the credit, you can respond to the notice by following the instructions below. But if you've decided that you no longer want to claim this credit or if you've realized that you're ineligible for the credit, you can just ignore the notice.
How Notice CP75 Affects Your Tax Refund
If you receive Notice CP75, the IRS will not pay the credits listed on the notice until you respond. For example, say that your tax refund is $3,000 but $2,000 is related to the Earned Income Tax Credit. The IRS will typically send you just $1,000. It will hold back the rest of the refund until you respond to the notice.
What to Do If You Receive Notice CP75
If you receive Notice CP75, review the notice carefully to see what information the IRS wants. The notice should also include a form detailing the documents you need to send to the IRS. Here is a breakdown of the type of information the IRS requests with this notice based on the details based audited:
Earned Income Tax Credit
To qualify for the EITC, you must have a qualifying dependent who lived with you in the United States for more than half of the tax year. A qualifying dependent is a child under the age of 19, a student under the age of 24, or a permanently disabled person of any age. They also must be related to you as a child, step-child, grandchild, step-grandchild, great-grandchild, or step-great-grandchild. Alternatively, they may be your sibling, half-sibling, niece, or nephew.
Depending on your situation, you may need to submit documents that proved that you lived together for more than half the year or that establish your relationship with the dependent. You may also need proof that they were in school or are permanently disabled. Qualifying documents may include birth certificates, custody documents, adoption papers, paternity tests, school records, medical records, or proof of address. Use Form 886-H EIC to determine which supporting documents you should send to the agency.
Sometimes, the IRS may want proof that you are eligible to claim the dependents listed on your tax return. If you're also responding to a request about the EITC, you can use the same documents. In other cases, you may use divorce decrees, custody orders, birth certificates, marriage certificates, or adoption documents. Check out Form 886-H-DEP for more details.
Head-of-Household Filing Status
To file as head-of-household, you must be unmarried, have a qualifying dependent, and pay over half of the household expenses. IRS Form 14824 (Supporting Documents to Prove Filing Status) has a detailed list of the supporting documents you can use to verify your filing status.
If you've never been married, you don't have to prove that you're unmarried. If you've been married, you need documents that show you are currently divorced or widowed. If you're separated, you need proof that you were not living together at any time in the last six months.
To establish that you have a qualifying dependent, you can use the same documents used to verify an EITC claim. Finally, to establish that you paid more than half of the expenses, you can use canceled checks, receipts, or similar documents.
American Opportunity Tax Credit
The American Opportunity Tax Credit (AOTC) is a credit on qualifying tuition and expenses You can claim this credit on behalf of yourself or a student whose tuition and expenses you paid.
The student must be pursuing a degree or other recognized credential at least half-time during at least one academic period in the tax year. This credit can only be claimed for four tax years per student, and it is not available to students with felony drug convictions.
The IRS may expect you to prove any of the details noted above. In most cases, however, you can simply respond to Notice CP75 about the AOTC by submitting a copy of the student's 1098-T (Tuition Statement) received from the school and receipts for any other expenses claimed in relation to this credit.
Sometimes, the IRS sends out Notice CP75 because it wants more details about the info on your Schedule C (Small Business Profit and Loss). In this case, you will need to send supporting documents related to your business income and expenses. You also need to fill out and file Form 11652 (Questionaire and Supporting Document Form 1040 Schedule C (Profit or Loss From Business)).
Premium Tax Credit
The Premium Tax Credit offsets the cost of buying medical insurance from the healthcare exchange for people who meet certain income guidelines. The IRS also uses Notice CP75 to request more info about this credit.
If you didn't file Form 8962 with your tax return, you should also file that form. Simply, review it for accuracy if you already filed it. You may also need to submit copies of the following forms:
- Form 1095-A (Health Insurance Marketplace Statement).
- Form 1095-B (Health Coverage).
- Form 1095-C (Employer-Provided Health Insurance Offer and Coverage).
- Records about the names of individuals on your insurance policy.
- Details about policy allocation.
- Information about the alternative calculations for the year of marriage.
Send these documents to the IRS along with Form 14950 (Premium Tax Credit Verification).
Child and Dependent Care Tax Credit
This is a credit for expenses paid for child or dependent care while you were working or looking for work. If Notice CP75 wants verification about the Child and Dependent Care Tax Credit, you should refer to Form 2441 (Child and Dependent Care Expenses) to see which supporting documents you can use. This is the form that you use to claim this credit on your tax return.
Generally, you will need to provide more details about your care providers, their addresses, Social Security or Employer Identification Numbers, and how much you paid them. You may also need to prove that your income qualified you for this credit and that you were working or looking for work while the child or dependent was in care.
What Happens After You Respond to Notice CP75?
Once you send in your response to Notice CP75, prepare to wait. The IRS can take up to a month or even longer to process your response. After reviewing your response, the IRS will either decide to allow or disallow the credit.
If the IRS allows the credit, the agency will send out your refund within about eight weeks. If the agency does not allow your credit, it will send you a letter explaining that your refund is smaller or your tax due is higher.
In some cases, if the IRS disallows a credit, the agency will also send you CP79. This notice explains that you were not able to claim the credit in the audited year, and it explains what you need to do to claim the credit in the future. You may need to submit Form 8862 (Information To Claim Certain Credits After Disallowance) if you want to claim a credit after it has been disallowed.
Why You Need to Respond to Notice CP75
In a lot of cases, the IRS sends notices repeatedly before taking action. This is not the case with Notice CP75. The IRS will take action after sending this notice. Here is why you should respond to this notice:
- If you don't respond, the IRS may disallow the credit.
- If the credit is disallowed, the IRS may reduce your refund or increase your tax owed.
- In some cases, the IRS may disallow the credit for future years.
- If the IRS believes that you have claimed the EITC fraudulently, the IRS may ban you from claiming the EITC for the next two to 10 years.
Failing to respond to Notice CP75 can cost you a lot of money. It can also impair your ability to claim certain credits in the future. Make sure that you respond to this notice by the due date.
Get Help With Notice CP75
To ensure you respond to this notice properly, you may want to get help from a tax professional. They can answer your questions and make sure the IRS gets the right information to substantiate your refund claim. TaxCure's search feature can help you find a local tax professional experienced with your particular tax concern — find help today.