Can the IRS Reject a Return After It’s Accepted?
An accepted tax return isn't always final. Understand the IRS's ongoing review process and potential actions after initial filing.
Many believe that once the Internal Revenue Service (IRS) “accepts” a tax return, the filing process is complete. However, this initial “accepted” status is merely a preliminary step in the tax return processing system. It indicates your return passed basic, automated checks, but not a comprehensive review or final approval of your reported income, deductions, or credits. The IRS may still review your return in detail after this initial acceptance.
Understanding Initial Acceptance
When an electronically filed tax return is marked as “accepted,” it means the IRS system has received the submission and verified fundamental information. This includes confirming correct Social Security numbers, valid formatting, and that the return is not a duplicate. This automated validation typically occurs within 24 to 48 hours for e-filed returns.
The “accepted” status indicates your return has entered the IRS processing pipeline. This differs significantly from an “approved” status, which means the IRS has completed its thorough review and confirmed your tax liability. For returns expecting a refund, “approved” signifies the IRS has finished processing and authorized the refund’s release.
Reasons for IRS Review After Acceptance
Even after a tax return is initially accepted, several factors can prompt the IRS to conduct a more in-depth review. A common trigger is data matching discrepancies. The IRS compares information reported on tax returns with data from third parties, such as W-2s from employers and 1099s from banks. If there is a mismatch between what you reported and what these third parties submitted, it can lead to an inquiry.
Mathematical or clerical errors on the return can also instigate a review. Automated systems may flag calculation mistakes or missing information, prompting the IRS to make adjustments. Additionally, tax returns can be selected for audit. This selection can occur through random processes, specific issues, or unusually high deductions or credits relative to reported income.
Identity theft represents another reason for post-acceptance review. If a taxpayer’s identity is stolen and used to file a fraudulent return, the IRS may need to take action even if the initial fraudulent filing was accepted. This often comes to light when the legitimate taxpayer attempts to file their own return and finds a duplicate has already been processed.
Types of IRS Communications and Actions
Following an initial acceptance, the IRS may send various forms of communication if a review is initiated. One common notice is a CP2000, an Underreporter Inquiry. This notice is typically sent when there’s a discrepancy between income reported by third parties and what the taxpayer reported, proposing changes to the tax liability. It is a proposal, not a bill, and requires a response.
Taxpayers might also receive audit notices, such as a CP2501 or CP75, informing them their return has been selected for examination. These notices usually request additional documentation to support reported figures. Audits can range from correspondence audits, handled entirely by mail, to office or field audits, which involve in-person meetings.
In more serious cases, a Notice of Deficiency may be issued. This formal notice indicates the IRS has determined additional tax is owed and provides the taxpayer 90 days to petition the U.S. Tax Court if they disagree with the assessment. Furthermore, if a taxpayer owes money to other federal or state agencies, such as for past-due child support or defaulted student loans, their tax refund might be reduced or “offset” to cover those debts.
How to Respond to IRS Inquiries
Receiving an IRS notice after your return has been accepted requires prompt and careful attention. First, thoroughly read the notice to understand the specific issue and required action. Pay close attention to any deadlines mentioned, as these are crucial to avoid further penalties or complications.
Next, gather all relevant records and supporting documents that substantiate your original tax return or address the IRS’s concerns. This documentation might include W-2s, 1099s, or other financial statements. Send copies of documents, not originals, and keep detailed records of all correspondence with the IRS.
Respond by the specified deadline, typically within 30 days for many notices or 90 days for a Notice of Deficiency. If the issue is complex or you are unsure how to proceed, consider consulting a qualified tax professional, such as a CPA or Enrolled Agent. Ignoring IRS correspondence is strongly discouraged, as it can lead to additional interest, penalties, and enforced collection actions.