IRS Reference Number 1242 – IRS CP05 & CP05A Notices
IRS reference number 1242 indicates a discrepancy and the account is frozen pending review of supporting documentation from the taxpayer or third parties. In most instances, an IRS CP05 Notice is issued in which the IRS notifies the taxpayer in writing that their return is on hold and under review. The review is in order to verify certain line items on the submitted tax return.
The IRS recommends that you check the status of your return on the IRS WMR “Where’s My Refund?” portal. Often, you will see a message saying your return is being processed or that your refund is on the way. Occasionally, you may obtain one or more error codes. For example, IRS reference number 1242. IRS uses code 1242 to inform you that your return has, in fact, been received electronically. However, your return has been selected for review and will be frozen until the review process is complete. The IRS selects some returns randomly to determine if income, expenses, and credits are being reported accurately. As a result, this doesn’t mean you made an error or were dishonest. The IRS simply utilizes code 1242 to signify that your return was received, but it has been selected for review. Therefore, it will be frozen until the review process is completed.
IRS Reference Number 1242 – According to IRS Section 8 Master File Codes
1242 – Electronic return received more than 3 weeks ago; –E Freeze; in review, notice for additional information will be received IRM 21.5.6.4.8, -E Freeze (Source: irs.gov)
IRS uses code 1242 to confirm that your return was received electronically and is not lost. However, it has been selected for review and will be frozen until the review process is complete. In the meantime, the IRS is confirming some items regarding your return. This could be confirming your income, income tax withholding, tax credits, or business income. The initial review is based on the information given to the IRS by third parties. For example, employers, banks, or other payers using your name and Social Security Number (SSN).
IRS Reference Number 1242 & CP05 Notice
The IRS will notify you in writing that they are holding your return until they finish their investigation. IRS CP05 is expressly for this purpose. In this notice, the IRS advises the following:
- Your return is on hold – We have received your tax return. However, we’re holding your refund until we finish reviewing it.
- Questions – We’ll contact you or your authorized representative if we have questions.
- Third-party contacts – We may also contact third parties if we need to verify information while we’re reviewing your return. When we contact third parties, we’re prohibited from disclosing any more information than is necessary to verify what we need.
- Your rights to information – We’re required to keep a record of third-party contacts we’ve made. You have the right to request a copy of the list of those contacted by calling the number below or writing to the address at the top of this notice.
- 60-day delay – We could take up to 60 days to complete this review. Please don’t contact us prior to 60 days from the date of this notice since we won’t be able to provide you with any additional information.
- How to check status – You can check your refund status at www.irs.gov/refunds or the IRS2Go mobile app for smartphones.
- We may need additional information from you – Once we finish our review, we may send your refund, ask for additional information, or deny all or part of your refund.
- Your right to appeal – If you don’t agree with the denial, you’ll have an opportunity to appeal.
Following the completion of the IRS’s initial examination, you may be asked to verify tax credits claimed, income tax withholding, or business expenses before your refund is given or applied as an overpayment to next year’s anticipated tax.
Understanding the IRS CP05A Notice
In your CP05 notice, the IRS advised that they may ask for additional information. IRS CP05 A is the written request for that additional information. In this notice, the IRS advises the following:
- The IRS needs additional information – We need information before we can send a refund.
- Provide the specified documentation – Send us copies of the items listed on the notice so we can verify your income and income tax withholding.
- Attach everything to this notice – Attach your documents to the notice contact stub.
- Use fax or mail – Fax your documents to the fax number in the notice using either a fax machine or an online fax service. Or, mail your response to the address shown on the stub.
- Time-sensitive – Send your response within 30 days from the date of the notice by
You must respond to the request for review within 30 days by providing well-supported documentation. If you do not supply the documentation or the IRS believes the deduction is not supported correctly, the return will be adjusted. If that is the case, you will be able to file an appeal.
How to File an Appeal
If you believe you fit the qualifications for an appeal, you may request one by submitting a written protest. Summarize your objection and send it to the IRS address listed on the letter outlining your appeal rights. Do not send your protest to the IRS Independent Office of Appeals (Appeals). Doing so will only delay the process and may prohibit Appeals from hearing your case.
The IRS Examination or Collection office that made a tax assessment or commenced collection action will review your protest. They will endeavor to resolve the disputed tax issues before submitting your case to Appeals. If that office is unable to settle your concerns, they will forward your matter to Appeals for review. You may represent yourself or have a professional represent you at Appeals. This means an attorney, certified public accountant, or an enrolled agent authorized to practice before the IRS.
If your case qualifies for an appeal, we will review the issues of your case with a fresh, objective perspective and schedule a conference with you. Our conferences are informal and are conducted by correspondence, telephone, video conference, or in-person conference. We may be able to resolve your disputed issues and help you to avoid the time and expense of a court trial. We will consider any reason you have for disagreement. (Source: irs.gov)
Frequently Asked Questions About IRS Reference Number 1242 – IRS CP05 – IRS CP05A
Why is my return being audited or reviewed?
The IRS accepts most returns as submitted. However, a small proportion of returns are chosen for closer investigation. Some income returns are examined to ensure that the income, expenses, and credits recorded on the return are correct. The IRS chooses tax returns for review by a variety of approaches. This may include random sampling and computerized screening. The IRS also compares information related to the return, such as W-2 and 1099 forms. The fact that your tax return was chosen for scrutiny could be entirely random. It does not necessarily imply that the IRS believes you committed an error or lied on your return.
I received an IRS CP05 Notice and then a CP05A Notice asking for documentation. What if I fail to respond?
If you fail to answer or miss the 30-day deadline, the IRS will reject all or part of your refund. Moreover, it may issue you a notification that additional taxes will be due.
How can I avoid receiving an IRS CP05 or CP05A Notice in the future?
There are two things you can do to avoid receiving a CP05A Notice from the IRS. The first is to keep thorough and accurate documentation supporting the amounts claimed on your income tax return. Secondly, seek the advice of a qualified tax professional prior to filing your tax return. If you DO receive an IRS CP05 Notice, these steps will help quickly resolve issues raised.
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