The CP39 tells you the IRS took your overpayment from one tax year and applied it to outstanding balances in other tax years. Instead of receiving a refund, your overpayment was used to reduce debts you owed for other periods.
How It Works
Under IRC Section 6402, the IRS can apply overpayments to outstanding tax liabilities across years. If you have a $5,000 refund for 2025 but owe $3,000 for 2023 and $1,500 for 2024, the IRS can apply your refund to those balances. You'd receive the remaining $500 as a refund (assuming no penalties and interest eat into it).
The CP39 shows which tax periods received credit and how much was applied to each. It also shows any remaining refund after all offsets.
Verify the Application
Review the notice to confirm the balances in the other periods were correct. If you were disputing a balance in one of those periods, the offset may have been applied to a contested amount. Contact the IRS if the underlying balance was incorrect.
Also verify that any remaining refund was issued to you. If the overpayment was fully consumed by the offsets, the CP39 will show a zero remaining balance.
Strategic Consideration
If you owe multiple years of taxes, the IRS's offset sequence may not align with the best strategic outcome. The IRS typically applies overpayments to the oldest balance first. But if a newer balance has a longer remaining CSED, you might prefer the credit go there instead. Unfortunately, you don't get to choose the application order for automatic offsets.
If you want to discuss how overpayment offsets affect your overall resolution strategy, call us at (813) 229-7100.