CP49 Notice: What It Means and Your Response Options

A CP49 notice is a formal letter from the IRS informing you that all or part of your tax refund has been applied to a past-due federal tax liability. This action, known as an offset, is generated automatically when a taxpayer owed a refund also has an outstanding balance from a previous tax year. The notice serves as an official record of this transaction and details any adjustments made to your anticipated refund.

What a CP49 Notice Means

The notice will state the amount of your original refund from your most recently filed tax return. It then details the amount of that refund used to pay your overdue taxes, specifying the tax year to which the payment was applied. If your refund was larger than your debt, the CP49 will show the remaining amount that will be sent to you as a check or direct deposit. If the refund did not cover the entire balance, the notice will indicate the amount you still owe.

While the CP49 notice deals exclusively with federal tax debts, your refund can also be taken by the Treasury Department’s Bureau of the Fiscal Service (BFS) for other obligations. These can include past-due child support, federal agency non-tax debts, state income tax obligations, or certain unemployment compensation debts. If your refund was seized for one of these non-tax debts, you receive a different notice.

Options for Responding to the Notice

If you agree with the past-due tax debt and the offset amount, no further action is required. The notice serves as confirmation that your refund has been applied as payment. If the offset did not satisfy the entire debt, the notice will show a remaining balance due, which you will need to pay to avoid further interest and penalties.

If you filed a joint tax return and the past-due tax debt belongs solely to your spouse, you may be considered an “Injured Spouse” and could be entitled to receive your portion of the joint refund. This requires filing Form 8379, Injured Spouse Allocation, to ask the IRS to separate your share of the refund from your spouse’s debt. This form is not for disputing the validity of the debt itself, but for protecting your portion of the refund.

If you believe the underlying tax debt from the prior year is incorrect, you must dispute the original tax assessment itself, not the refund offset. You would need to contact the IRS at the number provided on the notice to discuss the discrepancy. This may involve providing documentation, such as canceled checks or a previously filed amended return, to prove the debt is invalid or has already been paid.

Filing an Injured Spouse Claim

To file an Injured Spouse Claim, you must submit Form 8379, Injured Spouse Allocation. This form can be filed with your joint tax return if you anticipate an offset, or by itself after you receive the CP49 notice. The purpose of the form is to allocate income, deductions, credits, and tax payments between you and your spouse so the IRS can determine your portion of the refund.

To complete Form 8379, you will need the original joint tax return for the year in question and all supporting income documents for both spouses, like Forms W-2 and 1099. You must correctly separate all financial items, including wages, self-employment income, tax withholding, estimated tax payments, and any refundable credits.

When filling out the form, you will enter the amounts from your joint return into three separate columns: one for you, one for your spouse, and one for the joint total. The IRS uses this allocation to calculate the portion of the overpayment that is yours and should be refunded to you.