What This Notice Means

CP138, Notification That the Overpayment on the Return was Offset Against Another Tax Period with a Balance Due, tells a business that it overpaid on a return, such as a Form 941, and the IRS used that overpayment to pay a balance owed on another tax period.

The notice shows:

  • The amount of the overpayment
  • Any interest you earned on the overpayment
  • How much was applied to other tax periods
  • Any refund still due to you

A table on the notice lists each form, tax period, and taxpayer ID number the money was applied to.

What to Do

If the information is correct, you don't need to do anything. Keep the notice with your records and update your books to reflect where the money went.

  • If interest was paid on the overpayment, report that interest on your next income tax return.
  • If part of the overpayment is left after the offset, you should receive it as a refund in about 4 to 6 weeks, as long as you don't owe other federal debts the IRS must collect. If you asked on the return to apply the overpayment to the next period, the IRS follows that instruction instead.

If You Disagree

Call the number on the notice if you believe the balance that absorbed your overpayment was wrong. A common cause is a payment the IRS didn't credit. Have your payment records ready so the IRS can trace it.

If you had already arranged with the IRS to apply the credit somewhere else, the IRS may have moved it as you asked. In that case you may be told to disregard this notice.

Deadlines

None. This notice doesn't require a response.

If your business has IRS balances eating up its refunds, call us at (813) 229-7100.