How to Address This Notice

Receiving a notice from the IRS can be a stressful experience, especially when it’s something as confusing as a CP75. So, what exactly is a CP75 from the IRS? Essentially, it’s a notice that requests additional documentation to verify certain credits and deductions on your tax return. This can include credits like the Earned Income Tax Credit (EITC) or the American Opportunity Tax Credit (AOTC). The CP75 notice is part of the IRS’s effort to ensure that all claimed credits are legitimate and accurate.

If you’ve received a CP75 notice, respond promptly and accurately to avoid delays in your tax refund or potential penalties. The IRS is asking for proof to back up your claims, and failing to provide this documentation can lead to complications. But don’t worry—you’re not alone in this.

At Ronald Arthur Stearns Sr. PLLC, we assist clients with IRS notices and audits. Our seasoned team can help you gather the necessary documentation and ensure your response is complete and accurate. Don’t let an IRS notice disrupt your peace of mind. Contact us today at 1-512-257-0570 to schedule a consultation and get the dedicated help you need to resolve your tax issues effectively.

Understanding IRS Notice CP75

IRS Notice CP75, classified as a return accuracy notice, is a formal request from the IRS for supporting documents regarding your tax return information. Upon receiving this notice, carefully review it and keep a copy of your tax return handy for reference.

The purpose of IRS Notice CP75 is to audit certain aspects of your tax return, ensuring that all claimed credits and deductions are legitimate. This process helps the IRS confirm that the tax system remains fair and accurate for all taxpayers.

Why You Received IRS Notice CP75

There are several common reasons why you might receive IRS Notice CP75. One major reason is discrepancies in the information reported on your tax return. For instance, if the IRS finds inconsistencies between your reported income, expenses, or credits, they may issue this notice to clarify and verify the details. Additionally, your return could be selected for audit through random sampling or computerized screening, which doesn’t necessarily indicate any wrongdoing on your part.

Another typical reason for receiving this notice is if someone else claims a dependent that you also claimed. The IRS must verify who claims the dependent rightfully to prevent duplicate credits.

What Happens When You Receive CP75?

When you receive IRS Notice CP75, a portion of your refund related to specific credits will be temporarily withheld. This amount can be up to $2,000 and typically involves credits such as:

• The Earned Income Tax Credit (EITC)
• Additional Child Tax Credit (ACTC)
• Recovery Rebate Credit (RRC)
• Premium Tax Credit (PTC)

The IRS will hold this portion of your refund until you provide the necessary documentation to verify your claims. These specific credits are often flagged for additional review because they are refundable credits. Refundable credits can result in a refund even if you owe no tax, making them a target for potential errors or fraudulent claims.

The IRS scrutinizes these credits more closely to ensure compliance and prevent improper payments. For instance, the EITC is designed to assist low- to moderate-income working individuals and families, but its complexity often leads to mistakes in eligibility determination. Similarly, the ACTC provides significant financial assistance to families with children, making it important for the IRS to verify that the credit is claimed correctly.

The RRC, introduced as part of the COVID-19 relief measures, and the PTC, which helps offset the cost of health insurance premiums, are also subject to additional review due to their substantial impact on taxpayers’ refunds. Ensuring that these credits are accurately claimed helps maintain the integrity of the tax system and ensures that the benefits reach those who are truly eligible.

Responding promptly to Notice CP75 helps avoid further delays in processing your tax return and receiving your refund. If you fail to respond, the IRS may assume you no longer wish to claim the credits, resulting in a reduced refund or additional tax liabilities.

Please note that the amount of tax credits can change based on IRS regulations, individual circumstances, and annual adjustments. It is important to verify the current credit amounts and eligibility criteria with a tax professional or the IRS.

Does Receiving CP75 Mean I’m Being Audited?

Receiving IRS Notice CP75 does not necessarily mean you are being audited in the traditional sense. Instead, it indicates that the IRS needs additional information to verify specific credits or deductions you claimed on your tax return. This process is often referred to as a “correspondence audit,” where the IRS requests supporting documentation through the mail rather than conducting a full in-person audit.

The primary focus of the CP75 notice is to ensure the accuracy and legitimacy of certain credits. By providing the requested documentation, you help the IRS confirm that your claims are valid, which helps maintain the integrity of the tax system. While this may feel like an audit, it is generally less invasive and can be resolved by submitting the required documents promptly and accurately.

Required Documentation for Responding to CP75

Responding to IRS Notice CP75 requires submitting various supporting documents to verify the claims on your tax return. Compile all requested documents and send them together to streamline processing. Ensure that all documents are clear and easy to read, and reference the specified tax year indicated in the notice. Submitting all documentation at once can prevent processing delays and potential complications.

Earned Income Tax Credit (EITC)

If you are claiming the EITC, you need to provide documentation proving your eligibility. The Earned Income Tax Credit (EITC) is a benefit for working people with low to moderate income. It reduces the amount of tax you owe and may give you a refund. To qualify, you must meet specific requirements and file a tax return, even if you do not owe any tax. This includes having a qualifying dependent who lived with you for more than half the year. The IRS typically includes Form 886-H EIC with Notice CP75, detailing the necessary documents to support your EITC claim. Failure to respond regarding the EITC can result in the IRS treating your claim as abandoned, affecting your eligibility for future tax credits.

Dependents

To claim dependents on your tax return, you must provide evidence that the qualifying dependent lived with you for more than half the year and that you provided over half of their support. Acceptable documents to prove eligibility include:

• Birth certificates
• Custody orders
• Adoption papers
• Divorce decrees
• Marriage certificates
• School records
• Medical records
• Social Security cards
• Utility bills showing shared address
• Lease agreements showing shared address

The IRS uses Form 886-H-DEP to list the required documents for claiming dependents, ensuring that you have the necessary proof.

Head of Household Filing Status

To confirm head-of-household filing status, you need to complete Form 14824 and meet three specific tests related to marital status, household maintenance, and qualifying dependents:

• The marital status test requires that you are unmarried or considered unmarried on the last day of the tax year.
• The household maintenance test mandates that you have paid more than half the cost of keeping up a home for the year, which can be demonstrated through canceled checks, receipts, or similar documents.
• The qualifying dependent test requires that you have a qualifying person who lived with you for more than half the year and is either your child, stepchild, foster child, sibling, or another relative who meets the IRS’s criteria for dependents.

American Opportunity Tax Credit (AOTC)

The American Opportunity Tax Credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. When responding to Notice CP75 regarding the AOTC, you need to provide specific documents to verify your claim. This typically includes a copy of the student’s 1098-T form and receipts for claimed expenses related to education. Failure to submit the necessary proof can result in the IRS revoking the credit, leading to a higher tax bill or a reduced refund.

Schedule C

Supporting Schedule C income for IRS Notice CP75 requires submitting Form 11652, copies of business records, Form 1099-MISC and/or Form 1099-NEC, and your business license. The Schedule C credit is for self-employed individuals or small business owners to report their income and expenses, thereby calculating the net profit or loss of their business.

You need to provide proof of business revenue, receipts, canceled checks, and bank statements to substantiate your income and expenses. Failing to provide the necessary details can prompt the IRS to update your tax records based on the available information.

Premium Tax Credit

To verify the Premium Tax Credit, you need to provide documentation such as an insurance enrollment form, proof of premium payments, and Form 1095-A. The Premium Tax Credit (PTC) is a refundable tax credit designed to help eligible individuals and families cover the cost of premiums for health insurance purchased through the Health Insurance Marketplace. The amount of the credit is based on your income and the cost of insurance in your area. Providing accurate documentation ensures that you receive the correct amount of credit and helps prevent any delays in processing your tax return. Proof of enrollment and premium payments is essential to avoid complications and ensure that your claim is processed smoothly.

Child and Dependent Care Tax Credit

The Child and Dependent Care Tax Credit assists taxpayers with expenses incurred for child or dependent care while working or seeking work. To validate this credit, you need to provide details about care providers, their identifiers, payment amounts, and proof of qualifying income. Form W-10 is used to submit details about the care provider.

How to Submit Your Response

At Ronald Arthur Stearns Sr. PLLC, we understand that responding to IRS Notice CP75 can be overwhelming. Our goal is to make this process as smooth and stress-free as possible for you. We offer comprehensive support to help you gather, organize, and submit all necessary documentation accurately and efficiently.

Submission Methods

We assist you in choosing the best submission method—whether it’s mail, fax, or the IRS’s secure online upload service known as Exam Reply. Our team ensures that your documents are clear, complete, and organized, preventing any delays in processing and ensuring that your response is handled efficiently by the IRS.

Ensuring Accuracy and Completeness

Our experienced professionals meticulously review your documents to ensure accuracy and completeness. By providing clear, legible, and well-organized documentation, we help facilitate a smoother review process with the IRS. If you have any uncertainties, our team is here to offer advice on IRS procedures, helping you avoid costly mistakes and ensuring your response meets all requirements.

By working with Ronald Arthur Stearns Sr. PLLC, you can rest assured that your response to IRS Notice CP75 will be handled with the utmost care and professionalism.

What to Expect After Submitting Your Response

Once you have submitted your response to IRS Notice CP75, the IRS will begin the review process. Typically, this involves addressing an IRS audit to verify the accuracy of the information provided.

Timeline for IRS Review

After submitting your documents, the IRS requires at least 30 days to review the information before providing feedback. However, this process can sometimes take longer depending on the complexity of your case and the volume of submissions they receive. Be patient during this period and avoid making assumptions about the outcome.

If the IRS accepts your documentation and finds that your tax return is accurate, you will receive your refund within approximately eight weeks. On the other hand, if the documents do not prove eligibility for the credits claimed, the IRS will send an audit report detailing the changes made to your return.

Potential Outcomes

There are a few potential results after the IRS completes its review of your submitted documents:

• Approval of Claims: If your documents prove your eligibility for the claimed credits, the IRS will close the audit and issue your refund within about eight weeks. This favorable result means that your tax return has been verified and accepted as accurate.
• Audit Report with Proposed Changes: If the IRS finds insufficient evidence to support your claims, they will issue an audit report detailing the proposed changes to your tax return.
• Disallowance of Credits: In some cases, if a credit is disallowed, you will receive a CP79 notice, and you may need to submit Form 8862 to reclaim the credit in future years.

Ronald Arthur Stearns Sr. PLLC is committed to guiding you through understanding your outcomes and providing follow-up assistance as needed.

Consequences of Not Responding to CP75

Failing to respond to IRS Notice CP75 can lead to significant financial and legal consequences. Ignoring the notice can result in the IRS assuming you no longer wish to claim the credits, leading to adjustments in your tax return. Address the notice by the specified date to avoid complications and potential penalties.

Impact on Tax Refund

If you do not respond to IRS Notice CP75, you may face a reduced tax refund or even additional tax liabilities. The IRS may disallow the credits you claimed resulting in a higher tax bill. Providing the necessary documentation supports your claims and helps avoid financial setbacks.

Ignoring the notice can also lead to long-term consequences, such as impairments on future credit claims. Responding promptly and accurately protects your financial interests and maintains compliance with IRS regulations.

Future Implications

Neglecting to respond to IRS Notice CP75 can have lasting implications on your tax filings and interactions with the IRS. If you ignore the notice, the IRS will adjust your tax return based on the available information, which could result in a lower refund or an increased tax bill. This can create financial strain and complicate your tax situation in future years.

Additionally, failing to address the notice can impact your ability to claim certain tax credits in the future. The IRS may view your lack of response as an indication that you no longer wish to claim these credits, affecting your eligibility and leading to further scrutiny in subsequent tax filings.

Getting Professional Help

IRS Notice CP75 can be daunting, but professional assistance can make the process more manageable. Tax professionals, such as attorneys and accountants, can help you understand the notice, gather the necessary documentation, and ensure that your response is complete and accurate.

Benefits of Hiring a Tax Attorney

A tax attorney offers several advantages when dealing with IRS Notice CP75. A tax attorney can help you understand IRS programs to settle tax obligations and ensure that all required details are accurately provided. This can prevent incorrect IRS adjustments and reduce the risk of penalties or additional tax liabilities.

It is not recommended to appear in IRS proceedings without representation, as a tax attorney can provide advice and representation to protect your interests. Their knowledge and experience can be invaluable in managing IRS communications and ensuring compliance with tax regulations.

Ronald Arthur Stearns Sr. PLLC Services

At Ronald Arthur Stearns Sr. PLLC, we assist clients with IRS Notice CP75 by providing comprehensive support throughout the entire process. Our services include:

• Document Compilation and Submission: We help gather and organize all necessary documents required to respond to CP75, ensuring they are clear, complete, and accurately reference the specified tax year.
• Experienced Guidance: Our seasoned team explains the specific documentation needed for claims involving the Earned Income Tax Credit (EITC), American Opportunity Tax Credit (AOTC), dependents, head-of-household status, and more.
• Audit Defense: We provide robust audit defense, representing you in communications with the IRS to clarify any discrepancies and substantiate your claims.
• Timely Response: We ensure that your response is submitted promptly to avoid delays in processing your tax return and receiving your refund.
• Follow-Up: We monitor the progress of your submission and keep you informed about the review timeline and potential outcomes.

Our clients describe us as knowledgeable, honest, professional, and dedicated, highlighting our commitment to helping them understand and manage their tax situations.

How Ronald Arthur Stearns Sr. PLLC Can Help You

At Ronald Arthur Stearns Sr. PLLC, we pride ourselves on offering personalized and comprehensive tax resolution services that set us apart from the competition. Our firm has been serving Texas taxpayers since 1995, and Ronald A. Stearns personally handles every case, ensuring that each client receives dedicated attention and knowledgeable guidance. Our clients consistently describe us as knowledgeable, honest, and professional, confirming our commitment to providing top-notch service.

What sets us apart is our thorough understanding of IRS procedures and our commitment to resolving challenging tax issues successfully. Whether you need help with collection defense, audit defense, or exploring various tax resolution options, our experience and dedication can help you achieve a favorable result. We emphasize that the IRS can settle tax obligations for less than the amount owed if specific criteria are met, offering valuable opportunities for our clients.

Don’t face IRS challenges alone. Let Ronald Arthur Stearns Sr. PLLC be your trusted partner in resolving your tax issues. Contact us today at 1-512-257-0570 to schedule a consultation and take the first step toward financial peace of mind.