What CP07 means
CP07 says the IRS received your return and is holding your refund while it reviews one of two things: tax treaty benefits you claimed, or the itemized deductions on your Schedule A. Sometimes both.
It is not a bill. It is not an audit report. The IRS says you don't need to do anything right now.
Why you got it
The IRS says it randomly selects returns for this review when they claim treaty benefits or Schedule A deductions. Random does not mean meaningless. It means your return fit the profile for a closer look, and the refund waits until the look is done.
How long it takes
The IRS says that if it finds no issues, it will send your refund within 12 weeks, as long as you don't owe other taxes or debts it is required to collect. If it does find a problem, it will mail you a notice with more information and instructions within 12 weeks.
All contact will come by mail. If you have moved since filing, or plan to, update your address with the IRS now so the next letter reaches you.
Twelve weeks feels long when you are waiting on money. Filing a second return makes it longer.
What to do now
- Do nothing with the IRS yet. No response is requested.
- Do not file a duplicate return. The IRS says it slows the review.
- Update your address if it has changed.
- Organize your records for whatever the review focuses on, so you can respond fast if the IRS writes back.
- Mark the 12-week point on your calendar.
If the review is about treaty benefits
Tax treaties can reduce or eliminate U.S. tax on certain income for residents of treaty countries. Claiming those benefits comes with paperwork. IRC 6114 requires a taxpayer who takes the position that a treaty overrules or modifies a provision of U.S. tax law to disclose that position on the return or an attached statement, in the manner the IRS prescribes.
Gather the documents that support your claim: proof of residence in the treaty country, the treaty article you relied on, and records showing the type and source of the income. The IRS points to Publication 901, U.S. Tax Treaties, and Publication 519, U.S. Tax Guide for Aliens, along with Publications 54, 514, and 570 for related situations.
If the review is about Schedule A
Itemized deductions are only as good as the records behind them. Get yours together now.
- Charitable gifts. IRC 170(f)(8) denies a deduction for any single contribution of $250 or more unless you have a contemporaneous written acknowledgment from the charity. Find those letters. Bank records alone do not satisfy that rule for larger gifts.
- Medical expenses. IRC 213(a) allows medical expenses only to the extent they exceed 7.5 percent of adjusted gross income, and only if they were not reimbursed by insurance or otherwise. Gather bills, proof of payment, and insurance explanations of benefits.
- Taxes and mortgage interest. Pull your property tax bills, state tax payment records, and Form 1098 for mortgage interest.
- Everything else. If it is on Schedule A, you should be able to show where the number came from.
If you claimed education-related benefits, the IRS also lists Publication 970, Tax Benefits for Education, as a reference for this notice.
Interest on a delayed refund
A held refund can earn interest, but not always. IRC 6611(e) says no interest is paid if the IRS refunds an overpayment within 45 days after the return's due date, or within 45 days after the date the return was filed if it was filed late. If the review pushes the refund past that window, interest may be included. The IRS also notes in its notice pages that interest you receive on a refund is taxable income in the year you receive it.
Your refund may be smaller than expected
Even if the review finds nothing wrong, the refund you receive may not match the return. The IRS says it will send the refund within 12 weeks if you don't owe other taxes or debts it is required to collect. IRC 6402(a) lets the IRS apply an overpayment to other federal tax you owe before refunding the rest. If part of your refund is applied elsewhere, you should receive a notice explaining the offset.
Keep an eye on your account
An IRS online account lets you see notices, payments, and your account transcript. If the 12 weeks pass and nothing has arrived by mail, check there before you call. The transcript will often show whether the hold has been released or whether an adjustment is pending.
What not to do
Do not call every week. The notice says the IRS will contact you by mail.
Do not amend the return just because of this notice. If you find a real mistake while organizing records, consider whether an amendment is needed, but do not amend out of nervousness.
Do not throw anything away until the refund is in your account and the review is closed. A deduction you cannot document is a deduction you will probably lose, even if you were entitled to it.
Do not ignore a later letter because the first one said no action was needed. The next notice may have a deadline.
If a second notice arrives
If the IRS finds a problem, the next notice will explain it and give you instructions and a deadline. Read it carefully and respond by its date. If the IRS proposes to deny a deduction or a treaty benefit, you will usually have a chance to send documents or disagree. Our guide on refund hold letters covers related notices.
The law behind CP07
IRC 6114 requires disclosure of treaty-based return positions. IRC 170(f)(8) sets the written acknowledgment rule for charitable gifts of $250 or more. IRC 213(a) sets the medical expense floor at 7.5 percent of adjusted gross income. IRC 6611(e) explains when interest is not paid on refunds. The IRS's CP07 page sets the 12-week timeline and the instruction not to file a duplicate return.
If a review turns into a proposed denial and you want help responding, call us at (813) 229-7100.