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IRS Notices: Refund Holds for Delinquent Returns

IRS Notices: Refund Holds for Delinquent Returns

The CP88 Notice is used when a taxpayer’s refund is being held because they have delinquent tax returns. When you receive this notice, you should either file your past due returns or notify the IRS that you were not required to file a return.

Why Refunds Get Held

The IRS generally seizes the refunds of any taxpayer who has delinquent tax debt. However, they can also hold your refund when you unfiled returns. A “hold” just means that they won’t send you the refund until you resolve the issue.

The IRS does this because they believe you may owe taxes for a prior year. For example, say you are owed a $2,000 refund for your 2018 return. You never filed your 2017 return, but it would have resulted in a $3,000 tax liability if you filed it. 

In this case, the IRS doesn’t want to pay your refund because it’s possible you’ll never file your 2017 return or pay your tax bill. How you resolve the issue will depend on your reason for not filing and whether you do, in fact, owe the IRS money.

Reasons for Not Filing

There are several reasons you may have unfiled tax returns:

  • You weren’t required to file, but the IRS mistakenly believes you were.
  • You didn’t know you needed to file.
  • You didn’t file because you couldn’t pay your taxes.
  • You thought you filed your tax return, but it was rejected or there was a processing error.

If you weren’t required to file, you can contact the IRS and inform them of this fact. Keep in mind that in some cases you may be required to file a tax return even if your income is below the filing threshold amount, such as when you are self-employed or received advanced premium tax credits.

If you just forgot to file, then file your delinquent return! You may even be eligible to receive a refund if it’s been less than three years since the return due date.

If you owe taxes on the prior year return, you’ll still need to file it. The IRS can continue to hold your refunds until you file. Eventually, the IRS may file a substitute return on your behalf.

The substitute return generally doesn’t give you any tax breaks and may result in a higher tax liability. The IRS can then attempt to collect the tax using enforced collection actions, including bank levies and wage garnishments.

Tax liabilities from prior year returns may be resolve using installment agreements, Offers in Compromise, or other tax resolution options. Contact a tax attorney to get help finding the best option for your case.

The Gartzman Law Firm offers tax return preparation and tax settlement help. Use our contact form to request a consultation with an Atlanta tax resolution attorney