What to Do After Receiving a CP Notice
If you’ve received a CP notice, don’t panic. While it’s not an ideal situation, there are ways to get it resolved. The IRS is more forgiving than most people think, and they’ll usually take the time to explain their notices. But you do need to take action once you receive the notice. The IRS is open to negotiation as long as you communicate with them.
Here’s what you need to know about what a CP means and how you should deal with it.
What is a CP Notice?
First: You can get a CP notice for some pretty minor things. A CP notice can be filed because your tax return was adjusted — and you owe a relatively small amount. A CP notice can also be filed because your tax return wasn’t able to be processed for other reasons. Usually, the CP notice is fairly clear regarding what happened, but resolving it can be confusing and necessitate contacting a tax preparer. For example, the IRS might need supporting documentation that you aren’t certain how to generate.
If there was missing documentation or the documentation that you filed was deemed to be incorrect, the first step is to talk to your tax preparer or EA. Your tax preparer will be able to go over the notice and either furnish the documents they need or file a corrected, amended return that addresses the problems.
If there’s money that you still owe, you may need to talk to the IRS. While there’s always the possibility of simply sending the money in, there’s also the potential that you may not be able to pay the amount that they’re asking for. If you’re unable to pay for the CP Notice, you need someone to contact the IRS and negotiate a payment plan for you.
How Can You Resolve a CP Notice?
CP notices that requestion either documentation or a small payment are fairly easy to resolve. You can do as the notice says, or you can furnish documentation that shows you’re exempt from whatever they’re asking for.
But if the CP notice is about money that is due, you may need to correct your filed return and make sure that you can pay the debt. If you can’t pay it all immediately, the IRS generally grants automatic payment plans for balances under $20,000. More than this, and you may need to furnish an accounting of all your assets, to show that you can’t afford to pay that amount right away.
It’s important that you don’t ignore a CP notice. It can be the first step before the IRS starts levying your accounts or garnishing your wages. The IRS will send you multiple notices, but will eventually need to start collecting your debts.
A CP notice doesn’t have to be alarming. Most people aren’t wild about talking to the IRS, but they do tend to be reasonable. Luckily, if you have an accountant, they can do all the talking for you. Contact your accountant right away.
Here’s what you need to know.
LENDERS ARE AS MYSTIFIED AS YOU ARE
Because there’s no set path towards filing forgiveness, borrowers need to connect with their lenders directly. Lenders will give borrowers a list of documents and start preparing their paperwork, but it’s possible the lenders won’t be able to actually file this paperwork until the government gives them additional guidance.
THE RULES FOR FORGIVENESS
It’s likely that organizations are going to need to show how their funds have been spent if they’re going to apply for forgiveness. While the exact ins and outs of applying for forgiveness may be questionable, organizations should already start getting their documents together and sending them in to their lender. Only then will their lender be able to start processing documents on their end.
SUBMITTING FORGIVENESS DOCUMENTS
- Their monthly account statements.
- Their monthly accounting reports.
- Their monthly payroll stubs or payroll reports.
The PPP loan has been a little questionable from the start, because there has been so little guidance for lenders. Many lenders started processing the PPP loans themselves even before they were certain what the requirements would be. Unfortunately, those who have already acquired a PPP loan may be left somewhat adrift until lenders come forward with their forgiveness requirements. Organizations that are waiting to get their loans forgiven should inquire with their lenders as soon as possible.