IRS CP39 Notice: How to Respond to Tax Refund Reductions
Summary:
The IRS CP39 Notice informs taxpayers that the IRS has used their tax refund to pay a past due federal tax debt. This debt could belong to the taxpayer, their spouse, or a former spouse if a joint return was filed. The notice outlines how the refund was applied and shows if there is any remaining balance. Acting promptly can help avoid penalties and further complications.
Struggling with IRS notices? If you’ve received an IRS letter and aren’t sure how to handle it, you might want to explore professional tax relief options. Optima Tax Relief has helped thousands of people resolve their tax issues and get back on track with the IRS. Learn more about how they can assist you with your situation.
Losing a tax refund to pay off old tax debts can be frustrating and confusing. The IRS sends a CP39 Notice when it applies your refund to a past due tax balance from a previous year. This debt may be linked to you, your spouse, or even a former spouse. Whether the refund covered the entire debt or not, taking the right steps is crucial. Ignoring the notice or delaying action could lead to penalties and interest piling up. Understanding why the notice was sent and knowing how to respond can help you stay in control of your tax situation.
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What is an IRS CP39 notice?
The IRS CP39 notice informs you that the IRS has used your tax refund, or part of it, to cover a past due tax debt. This debt may stem from a previous year, or it could belong to your spouse or former spouse if you filed jointly. The notice details how much of the refund was applied to the debt and whether any balance remains. If the refund didn’t cover the full debt, the notice will explain the remaining balance and outline the next steps.
How the IRS CP39 notice affects you
An IRS CP39 notice means the IRS applied your refund to your tax debt instead of sending it to you. This can be surprising, especially if you weren’t aware of any tax liabilities. In many cases, this occurs because of a joint return filed with a spouse or former spouse. If you think the debt isn’t yours or that a mistake was made, you can take steps to dispute the notice promptly.
Situations where the IRS CP39 notice applies
The IRS CP39 notice generally applies in the following situations:
- The IRS used your refund to cover unpaid taxes from a previous year.
- A joint return you filed with a spouse or former spouse resulted in your refund being applied to their unpaid tax debt.
- The IRS adjusted your return, and your refund was used to settle the resulting balance.
Understanding why you received the notice is crucial for determining your next steps.
Pro Tip
Set up IRS account alerts online to get real-time notifications on any changes to your tax return or account. This helps you stay updated on adjustments and due dates.
How to respond to an IRS CP39 notice
Read the IRS CP39 notice carefully
Begin by carefully reviewing the IRS CP39 notice. Check how much of your refund was applied to the debt and verify whether any balance remains. It’s important to ensure all the details in the notice match your records to avoid discrepancies.
Pay any remaining balance as soon as possible
If your refund didn’t cover the full debt, it’s crucial to make a payment promptly. Paying off the balance quickly can help you avoid additional penalties and interest that may accrue if you delay.
Continue your payment plan if you have one
If you already have a payment plan with the IRS, be sure to make all payments on time. Staying on track with your payment plan prevents further penalties and ensures your debt is paid without disruptions.
Dispute the notice if the debt is not yours
If you believe the debt does not belong to you, contact the IRS immediately using the phone number on the notice. Gather any supporting documents, such as past tax returns or proof of payment, to back up your claim and address the issue quickly.
Keep a detailed record of all notices and communications
Always retain copies of the IRS CP39 notice and any documents related to your dispute. This can be helpful for future reference if the issue arises again or if further action is needed.
Pro Tip
If you can’t pay the full balance, don’t delay in setting up a payment plan with the IRS. Managing the debt early helps you avoid penalties and interest charges.
How to dispute an IRS CP39 notice
If you believe the IRS CP39 notice is incorrect, you have the option to dispute it. Contact the IRS with supporting documents, such as previous tax returns, amended returns, or proof of payment that confirms your tax liability was already settled. When disputing, make sure to explain clearly why the debt is incorrect and submit the necessary documentation.
If the debt belongs to your spouse or former spouse, you may qualify for Innocent Spouse Relief. This relief prevents you from being held responsible for their tax debt if errors were made on a joint tax return without your knowledge. To request this relief, submit Form 8857 and provide evidence showing you were unaware of the inaccuracies at the time of signing. Keep in mind that filing deadlines apply, so it’s important to act promptly.
Pro Tip
Keep a detailed record of all notices received and any correspondence with the IRS. This will help you track any issues and provide documentation if you need to dispute a claim.
Payment options if you owe money after receiving the IRS CP39 notice
If your refund didn’t cover the entire debt, the IRS offers several payment options to help you pay off the remaining balance. It’s important to explore the solutions that best fit your financial situation to prevent additional penalties.
Installment agreements for the IRS CP39 notice
One of the most common ways to manage a remaining balance is by setting up an installment agreement with the IRS. This plan allows you to pay off your debt through monthly installments. However, be sure to make payments on time to avoid penalties or possible cancellation of the agreement. To qualify for an installment agreement, ensure that:
- All your tax returns have been filed.
- Your total debt, including penalties and interest, is $10,000 or less.
- You have complied with tax payments for the past five years.
Setting up an installment agreement requires a small fee, usually ranging from $43 to $225, depending on your income and payment method. Low-income taxpayers may qualify for a waiver of this fee if they agree to pay via direct debit.
Offer in compromise as an option
An offer in compromise allows you to settle your tax debt for less than the full amount if you meet certain criteria. The IRS may accept this offer if they believe:
- They cannot collect the full amount before the statute of limitations expires.
- There is genuine doubt about the amount of tax owed.
- Paying the full debt would cause significant financial hardship.
Because qualifying for an offer in compromise can be difficult, it is often helpful to work with a tax professional to ensure your application meets the necessary requirements.
Request a temporary delay in collection
If paying your tax debt would cause serious financial hardship, you can request a temporary delay in collection. This option gives you time to stabilize your financial situation without the pressure of collection actions like wage garnishments or levies. However, interest and penalties will continue to accrue, so it’s important to explore long-term solutions like installment agreements.
Explore other relief programs if needed
Taxpayers facing long-term financial hardship may qualify for additional IRS relief programs, such as Currently Not Collectible status. When granted this status, the IRS temporarily suspends collection activities. Although interest continues to accrue, this break allows you to focus on regaining financial stability before addressing the tax debt. It’s essential to use this time wisely and develop a plan for managing the debt when your financial situation improves.
Pro Tip
Review past tax returns to ensure accuracy, especially if a joint return was filed. Mistakes from previous years can trigger refund offsets and cause complications in future filings.
Potential consequences of not responding to an IRS CP39 notice
Ignoring the IRS CP39 notice can lead to serious consequences, including:
- Your remaining balance may increase due to accruing interest and penalties.
- The IRS may initiate collection actions, such as wage garnishments or bank levies, to recover the unpaid debt.
- You may lose eligibility for relief programs, such as payment plans or offers in compromise, if you don’t respond promptly.
Acting quickly to address the notice is essential to avoid these outcomes and resolve your tax debt efficiently.
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Frequently asked questions
What if the tax debt belongs to a former spouse?
If the debt that triggered the IRS CP39 notice belongs to your former spouse but your joint refund was applied to it, you may qualify for Innocent Spouse Relief. This relief can protect you from being held responsible for your former spouse’s tax debt. To qualify, you need to demonstrate that you were unaware of the tax liability at the time you filed the joint return. Providing evidence that you didn’t benefit from the unpaid taxes is also key to successfully claiming this relief.
Can a payment plan be modified after it’s set up?
Yes, if your financial situation changes, you can request a modification to an existing IRS installment agreement. Contact the IRS to explain your new circumstances and request the adjustment. This could result in lower monthly payments, which can make the plan more manageable. However, you’ll need to continue meeting the terms of the revised agreement. Additionally, be sure to submit updated financial information when requesting the modification to strengthen your case.
What happens if the refund doesn’t cover the full debt?
If your refund does not cover the entire debt, the IRS CP39 notice will notify you of the remaining balance. It is important to act quickly in addressing the outstanding amount by either making a payment or setting up a payment plan. The sooner you take action, the better, as you can avoid additional penalties and interest accumulating on the unpaid portion.
Is there a penalty for not responding to the IRS CP39 notice?
Although receiving a CP39 notice doesn’t automatically impose penalties, failing to respond or settle the outstanding balance can lead to more severe consequences. If you ignore the notice, additional penalties and interest can accrue on your debt. Moreover, the IRS may take enforcement actions like garnishing your wages or levying your bank account. To avoid these complications, it is best to respond as soon as possible.
How do you qualify for an offer in compromise?
To qualify for an offer in compromise, the IRS must determine that paying the full tax debt would cause significant financial hardship or that it is unlikely the debt will be fully collected before the statute of limitations expires. When considering your offer, the IRS evaluates your income, expenses, assets, and ability to pay. For a higher chance of acceptance, it’s crucial to provide detailed and accurate financial information. Submitting a well-prepared offer, ideally with the guidance of a tax professional, can help improve your chances of reaching a compromise.
Need help understanding other IRS letters and notices? Visit our comprehensive guide to IRS Letters and Notices or search for the document you received in the table below.
| CP01 | The IRS verified your claim of identity theft and will monitor your account. |
| CP01H | The IRS received a tax return with a social security number that belongs to a dead person. |
| CP02H | Money is due on an amended return based on a grant received due to Hurricane Katrina, Rita, or Wilma. |
| CP03C | You received the First-Time Homebuyer Credit for a house you purchased. |
| CP04 | You may be eligible for tax deferment because either you or a spouse served in a combat zone, a qualified contingency operation, or a hazardous duty station during the tax year specified on your notice. |
| CP08 | You may be entitled to additional money due to the Additional Child Tax Credit. |
| CP10 | Your tax return changed due to a miscalculation, and the refund you wanted to apply to an estimated tax payment has changed. |
| CP10A | Your tax return changed due to a miscalculation of the Earned Income Credit, and the refund you wanted to apply to an estimated tax payment has changed. |
| CP11 | You owe money because the IRS amended your return due to a miscalculation. |
| CP11A | Your tax return changed due to a miscalculation of the Earned Income Credit, and the refund you wanted to apply to an estimated tax payment also changed. |
| CP11M | Your tax return changed due to a miscalculation of the Making Work Pay and Government Retiree Credit, and the refund you wanted to apply to an estimated tax payment has changed. |
| CP12 | You are due a bigger refund because the IRS corrected one or more mistakes on your tax return. |
| CP12A | The IRS made changes to correct the Earned Income Credit (EIC) claimed on your tax return. |
| CP12E or CP12F | The IRS corrected a miscalculation on your return. |
| CP12M | The IRS made changes to the computation of the Making Work Pay and/or Government Retiree Credits on your return. |
| CP12R | The IRS made changes to the computation of the Rebate Recovery Credit on your return. |
| CP13 | The IRS made changes to your return due to a miscalculation. There is no refund or amount due. Your balance is zero. |
| CP13A | The IRS made changes to your return due to a miscalculation of the Earned Income Credit. There is no refund or amount due. Your balance is zero. |
| CP13M | The IRS made changes to your return due to a miscalculation of the Making Work Pay credit or the Government Retiree Credit. There is no refund or amount due. Your balance is zero. |
| CP13R | The IRS made changes to your return due to a miscalculation of the Recovery Rebate Credit. There is no refund or amount due. Your balance is zero. |
| CP14 | You owe money on unpaid taxes. |
| CP16 | The IRS made changes to your return due to a miscalculation. The refund you were due was applied to other tax debts. |
| CP21A | You owe money due to the changes you requested that the IRS make on your tax returns. |
| CP21B | You are due a refund due to the changes you requested that the IRS make on your tax returns. The money should arrive within 2 to 3 weeks. |
| CP21C | The IRS made the requested changes to your tax return. You will not receive a refund, and there is no tax due. Your balance is zero. |
| CP21E | As a result of your recent audit, the IRS made changes to your tax return, and you owe money as a result of those changes. |
| CP21I | The IRS made changes to your tax return relating to the Individual Retirement Arrangement (IRA) taxes. You owe money due to the changes. |
| CP22A | The IRS made the changes you requested, and you owe money as a result. |
| CP22E | As a result of your recent audit, the IRS changed your tax return, and you now owe money. |
| CP22I | The IRS made changes to your tax return relating to the Individual Retirement Arrangement (IRA) taxes. You owe money due to the changes. |
| CP23 | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. You owe taxes due to these changes. |
| CP24 | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. This resulted in an overpayment of estimated taxes. |
| CP24E | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. This resulted in an overpayment of estimated taxes. |
| CP25 | The IRS changed your return because there was a difference between the amount of estimated tax payments listed on your tax return and the amount actually posted to your account. You are not due a refund, nor do you owe any money. Your balance is zero. |
| CP31 | You need to update your address because your refund check was returned to the IRS. |
| CP45 | The IRS was unable to apply your overpayment to your estimated tax as you requested. |
| CP49 | The IRS used all or part of your refund to pay a tax debt. |
| CP53 | Your refund check will be sent by mail because the IRS can’t provide your refund through direct deposit. |
| CP57 | The bank declined your payment, so the IRS was unable to draft funds from your bank account. |
| CP71 | A reminder of the amount you owe in tax, penalty, and interest. |
| CP71A | A reminder of the amount you owe in tax, penalty, and interest. |
| CP71C | A reminder of the amount you owe in tax, penalty, and interest. |
| CP71D | A reminder of the amount you owe in tax, penalty, and interest. |
| CP88 | The IRS is holding your refund because you haven't filed one or more tax returns, and it believes you will owe tax. |
| CP90 | The IRS is notifying you of its intent to levy certain assets for unpaid taxes. You have the right to dispute the levy in a Collection Due Process hearing. |
| CP91 | The IRS will levy up to 15% of your social security benefits for unpaid taxes. |
| CP120 | The IRS needs documentation of your tax-exempt status. |
| CP120A | Your organization’s tax-exempt status has been revoked because it failed to file a Form 990 series return for three consecutive years. |
| CP130 | You may no longer need to pay the Alternative Minimum Tax (AMT) because your tax return filing requirements changed. |
| CP152 | The IRS received your return. |
| CP153 | The IRS will send your refund by mail because your direct deposit did not go through. |
| CP161 | You have an unpaid balance due to the IRS. |
| CP166 | Your monthly payment to the IRS did not go through due to insufficient funds in your bank account. |
| CP178 | You may no longer owe excise tax because your tax return filing requirements changed. |
| CP231 | You need to update your address because your refund was returned to the IRS. |
| CP259 | You did not file the business tax return identified in the notice. |
| CP259A | You should have filed these forms but did not – Form 990/990-EZ, Return of Organization Exempt From Income Tax, or Form 990-N (e-Postcard). |
| CP259B | The IRS requires you to file these forms but did not – Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation. |
| CP259C | The IRS believes that you are a private foundation, but did not file the required Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation. |
| CP259D | You must file this form, but you did not – Form 990-T, Exempt Organization Business Income Tax Return. |
| CP259E | You should have filed this form, but you did not – Form 990-N (e-Postcard) or Form 990/990-EZ, Return of Organization Exempt From Income Tax. |
| CP259F | The IRS requires you to file this form but did not – Form 5227, Split-Interest Trust Information Return. |
| CP259G | The IRS requires you to file this form, but you didn’t – Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations. |
| CP259H | As a tax-exempt political organization, you must file this form, but you did not – Form 990/990-EZ, Return of Organization Exempt From Income Tax. |
| CP276A | You submitted your tax liability schedule incorrectly. The IRS typically charges a Federal Tax Deposit (FTD) penalty for this but did not this time. |
| CP276B | The IRS did not receive the correct amount of tax deposits. It normally charges a Federal Tax Deposit (FTD) penalty but did not this time. |
| CP297 | The IRS is notifying you of its intent to levy certain assets for unpaid taxes. You have the right to dispute the levy at a Collection Due Process hearing. |
| CP297A | The IRS has levied your assets for unpaid taxes. You have the right to dispute the levy at a Collection Due Process hearing. |
| CP298 | The IRS notifying you of its intent to levy up to 15% of your social security benefits for unpaid taxes. |
| CP501 | You have a balance due on one of your tax accounts. |
| CP503 | You have an unpaid balance on one of your accounts, and the IRS has not heard from you. |
| CP504 | You have an unpaid amount due on your account. If you do not pay immediately, the IRS will levy your state income tax refund to apply it to the amount you owe. |
| CP504B | You have an unpaid amount due on your account. If you do not pay immediately, the IRS will levy certain property or rights to property to apply it to the amount you owe. |
| CP521 | A reminder that you have an installment agreement payment due. |
| CP523 | You have defaulted on your payment agreement. Therefore the IRS is terminating the agreement and will levy your assets. |
| CP601 | Usted tiene un saldo pendiente de pago (dinero que le debe al IRS) en una de sus cuentas contributivas. |
| CP603 | No hemos recibido respuesta de parte de usted y todavía tiene un saldo sin pagar en una de sus cuentas contributivas. |
| CP604 | Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará cualquier reembolso de impuestos estatales al que tenga derecho y aplicarlo al pago de su deuda. |
| CP604B | Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará ciertas propiedades o derechos de propiedad y lo aplicará al pago de su deuda. |
| CP621 | Este aviso es para notificarle que usted tiene un plan de pagos a plazos vencido. Por favor, envíe el pago inmediatamente. |
| CP623 | Este aviso es para informarle nuestra intención de cancelar su plan de pagos a plazos y confiscar (embargar) sus bienes. Usted incumplió en su acuerdo. |
| CP711 | Nosotros realizamos cambios a su planilla debido a que entendemos que hubo un cálculo erróneo. Como resultado de estos cambios, usted adeuda dinero por sus contribuciones. |
| CP721 | Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos. |
| CP722 | Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos. |
| CP771 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP772 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP773 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP774 | Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses. |
| CP959 | Usted no radicó su planilla de contribución de negocios identificada en este aviso. |
| CP2000 | The income or payment information on file doesn’t match your tax return. The discrepancy may result in an increase or decrease in your tax due. |
| CP3219A | The IRS has received information that is different from what you reported on your tax return. This may result in an increase or decrease in your tax. |
| CP3219N | The IRS didn’t receive your tax return, so it calculated your return based on the information received from employers, financial institutions, and others. If you want to challenge the proposed tax, you have 90 days from the date of this notice. If you are outside the country, you have 150 days. |
| Letter 0012C | The IRS needs additional information to process your tax return. |
| Letter 0484C | The IRS wants a completed |
| Letter 0525 | Updates you on proposed changes after an IRS examination. Any changes are explained and details the refund due or taxes owed. |
| Letter 531 | IRS Notice of Deficiency. The information the IRS received about you was different from what you reported on your return. |
| Letter 0668D(LP 68) | The IRS released their levy. |
| Letter 0549C | Your tax bill was paid. |
| Letter 0681C | The IRS accepted your payment proposal. However, this is not a formal Installment Agreement. |
| Letter 0757C | You did not adhere to the terms of your Installment Agreement. |
| Letter LT 11 | The IRS plans to seize your property or rights to property. |
| Letter 1058 | The IRS has not received your payment. It plans to seize your property or rights to property. |
| Letter 1615 (LT 18) | You must respond to the IRS within 10 days of this notice regarding past due tax returns. |
| Letter 1737 (LT 27) | Complete and sign Form 433F, Collection Information Statement. |
| Letter 1961C | Your application for a Direct Debit Installment Agreement was declined. It explains why and what you need to do to qualify. |
| Letter 1962C | Your application for a |
| Letter 2050 (LT 16) | The IRS is trying to collect unpaid taxes from you from returns that have been filed or from returns that have not been filed. |
| Letter 2257C | The IRS is providing the payoff amount that you requested. |
| Letter 226-J | An IRS letter to large employers notifying them that they may be liable for an Employer Shared Responsibility Payment (ESRP). |
| Letter 2271C | A request for an Installment Agreement has been approved. It explains the fees and how to qualify for a Low Income Fee Reduction. The letter may also request missing information. |
| Letter 2272C | An IRS letter explaining why your request to pay the balance due in installments was declined. |
| Letter 2273C | A confirmation letter of your request to pay the balance due in installments. It contained the amount to pay, fees charged, and where to send payment. Instructions on how to apply for the Low Income Fee Reduction included. |
| Letter 2318C | A response to a request to pay taxes due to payroll deductions. It also explains the fees that are charged. |
| Letter 2357C | The IRS is admitting that it did not send you the balance due notices that it should have. |
| Letter 2603C | The IRS accepted your installment agreement. The IRS will file a Notice of Federal Tax Lien on your personal property. |
| Letter 2604C | The IRS has accepted your request for installment payments. This IRS letter provides the monthly payment, the address where to send it, and the fees charged. The letter also provides instructions on how to apply for the Low Income Fee Reduction. |
| Letter 2761C | The IRS is requesting your combat zone service dates to ensure that it provides you with the special provisions and protection of the combat zone deferment. Copies of military orders or other documentation to support your time served may be requested. Civilians working in support of the Armed Forces may be required to provide a Letter of Authorization or a letter from their employer. |
| Letter 2789C | An annual reminder notice, as required by law, of the balance due to the IRS. It explains that penalties and interest continue to accrue until the balance is fully paid. |
| Letter 2840C | Confirms your Installment Agreement request and includes the payment amount and due date. This IRS letter explains the fees charged for paying monthly and explains how to apply for the Low Income Fee Reduction (if you qualify). |
| Letter 3030C | Provides an explanation of the tax, penalty, and interest still due on your account. |
| Letter 3127C | A confirmation of your request to make a change to your Installment Agreement. This IRS letter explains the fees for the change. Changes can be to the payment amount or due date, or it can include additional liabilities. |
| Letter 3174 | A reminder of taxes due after the IRS has sent a Notice of Intent to Levy. |
| Letter 3217C | The IRS has accepted your request to pay the balance in installments. This IRS letter provides your payment amount, the due date, and fees charged. The letter also provides instructions on applying for the Low Income Fee Reduction (if you qualify). |
| Letter 3228 (LT 39) | A request to pay the balance due within 10 days using the envelope provided. |
| Letter 3500 | The IRS has received your documents, and it needs additional time to review them. |
| Letter 3572 | Your Federal Income Tax Return has been selected for examination. The IRS auditor requests that you call to schedule an audit appointment. |
| Letter 4883C | The IRS received your federal income tax return but needs more information to verify your identity in order to process your tax return accurately. |
| Letter 4903 (LT 26) | You must file your tax returns immediately. The IRS has previously contacted you, but it did not receive a response. |
| Letter LP 47 | The IRS is trying to locate the person identified in the letter and is requesting that you provide their new address. |
| Letter LP 59 | The IRS has not received a response to the notice of levy it previously sent. |
| Audit Letter 2205 | The IRS manages audits either by mail or through an in-person interview to review your records. The interview may be at an IRS office (office audit) or the taxpayer’s home, place of business, or accountant’s office (field audit). |
| Letter 915 | You recently underwent an audit, and the IRS informs you that you now owe taxes. |
Key takeaways
- The IRS CP39 notice informs taxpayers that their tax refund has been applied to pay a past due tax debt.
- This debt could belong to the taxpayer, their spouse, or a former spouse if a joint return was filed.
- Taxpayers may still owe a balance even after the refund is applied, and should make timely payments to avoid penalties and interest.
- If the debt does not belong to you, you can dispute the notice by contacting the IRS and providing supporting documentation.
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