How Long Does an IRS CP05 Review Take?
Navigate the IRS CP05 notice. Learn about typical review durations and what to expect when your tax return is being verified.
A CP05 notice from the Internal Revenue Service (IRS) signals that your tax return is under review. This common inquiry indicates the IRS is taking additional time to verify information reported on your return. While receiving any IRS correspondence can be concerning, a CP05 notice is not an audit; it is an information request.
What a CP05 Notice Means
A CP05 notice from the IRS informs taxpayers that their tax return is being reviewed for accuracy. This review typically occurs when there is a discrepancy between the information reported on your tax return and data the IRS has received from third parties. The IRS uses this notice to verify details such as reported income, tax withholding amounts, or tax credits claimed, including those like the Earned Income Tax Credit or Additional Child Tax Credit. It can also relate to business income reported on a Schedule C.
A CP05 notice is not an audit, nor does it necessarily mean you have made an error. Instead, it serves as an alert that your refund may be delayed while the IRS conducts its verification. The notice indicates the IRS needs more time to cross-reference the information you provided with data submitted by employers, banks, or other payers. This initial notice generally does not require immediate action from the taxpayer.
The IRS Review Process and Timeline
When the IRS issues a CP05 notice, it initiates an internal review process to verify the accuracy of your tax return. This process often involves comparing the income, withholding, and credit information you reported against data it receives from third parties, such as Forms W-2 or Forms 1099. The IRS holds any pending refund during this verification period.
The typical timeframe for a CP05 review is often stated as 60 to 120 days from the date of the notice. However, this duration can vary significantly based on several factors. The complexity of the issues being reviewed, such as discrepancies in multiple income sources or complex credit claims, can extend the timeline. The sheer volume of cases the IRS is processing at any given time also influences how quickly a review is completed.
The accuracy and completeness of your initial tax return play a role. If the IRS needs to request additional information from you or third parties, this will prolong the review. For instance, if reported wages do not match IRS records, they may seek confirmation from your employer. The IRS may send follow-up notices, such as a CP05A or CP05B, if they require specific documents or clarifications.
What to Do When You Receive a CP05
Upon receiving a CP05 notice, carefully read the entire document. This will help you understand that the IRS is reviewing your return and that your refund may be delayed.
You should begin gathering all relevant documentation that supports the information on your tax return. This includes W-2s, 1099s, bank statements, and any records pertaining to credits or deductions you claimed. These documents serve as proof of the figures reported on your return. If the IRS sends a follow-up notice, such as a CP05A or CP05B, requesting specific information, you will need to respond promptly. Do not ignore the notice, as failing to respond to subsequent requests can lead to further complications.
Possible Outcomes of a CP05 Review
Once the IRS completes its CP05 review, several outcomes are possible. In many cases, the IRS may agree with the information on your original return, finding no discrepancies. If this happens, no changes are needed, and any pending refund will be issued.
Alternatively, the IRS might propose changes to your tax return if they identify discrepancies. These proposed changes could result in additional tax due, a reduced refund, or even an unexpected refund if an error was in your favor. If the issues are complex or remain unresolved after the CP05 review, the IRS may escalate the matter to a more formal audit. Following the review, the IRS will send a notice detailing their findings and any adjustments made, or they will proceed with issuing your refund.