IRS Notice CP06 & CP06A: What They Mean and How NRIs Should Respond

Imagine you're filing your US tax return and have a claim for a premium tax credit on your health insurance. You're waiting for a tax refund, but instead you get an IRS Notice CP06 or CP06A in your mail. Well, don't panic, as not all notices are scary. In this notice, the IRS is only asking you for additional information and documents to review whether your claimed health insurance tax credit is accurate.

If you have received IRS Notice CP06 that asks you to check your claimed Premium Tax Credit on your tax return, you are on the right page. This blog provides complete information about IRS Notice CP06 and CP06A, what they contain, and how to address them. So read on and clear all your doubts.

What Is IRS Notice CP06?

IRS Notice CP06 is a tax notice that the IRS sends you to inform you that they are formally reviewing your claimed Premium Tax Credit (PTC) and are holding some or all of your tax refund until you provide them with proof.

In simple terms, the IRS sent you CP06 to review whether your claimed premium tax credit on your tax return is accurate or not. Considering this, it does not have any connection with your wages, income earned from business, or other tax filing items.

So, if you get an IRS Notice CP06, it simply means that to get your premium tax credit, you need to provide the requested information and documents that prove that your claim is accurate.

Further, for the requested documents that you need to submit, download Form 14950, Premium Tax Credit Verification PDF, attached to your notice.

This was all about IRS Notice CP06. Moving ahead, let's know what IRS Notice CP06A is.

What Is IRS Notice CP06A?

IRS Notice CP06A asks you to submit the same information and documents as the IRS Notice CP06; however, it does not necessarily hold your refund. It is a companion notice used by the IRS to review a claim for the premium tax credit situation where the tax refund is not applied directly.

In simple terms, in IRS Notice CP06, your claimed refund is frozen, while IRS CP06A Notice is only used to verify your claim.

Considering this, it is used for the following purposes:

• It informs you that the IRS is reviewing your filed tax return.
• To confirm the mentioned information associated with your premium tax credit, it may ask for additional documents.
• It can delay issuing a refund or processing your tax return.

This was all about IRS Notice CP06A. Although both tax notices are used for the same purpose, i.e., to review the claimed premium tax credit on marketplace health insurance, the practical difference between them is how your refund is treated.

Moving further, let's know the reasons for getting an IRS CP06 or CP06A notice.

Why Did the IRS Send You a CP06 or CP06A?

As mentioned earlier, the common reasons for receiving an IRS Notice CP06 or CP06A are that the IRS is reviewing your claimed premium tax credit on marketplace health insurance. Here are some of the common reasons why the IRS reviews your claimed PTC on health insurance:

• Mismatch Information Between Form 1095 and Form 8962: If the amount mentioned in your marketplace health insurance does not match the amount reported on the reconciliation form, it is flagged automatically in the IRS system.
• Incomplete or Missing Form 8962: If you claimed the premium tax credit in your tax returns but forgot to attach the Form 8962 or did not provide accurate information on it, it also triggers IRS Notice CP06 or CP06A.
• Claiming PTC for the First Time: If you are claiming PTC for the first time, then you can also receive this notice, as new tax claims have no history on file to do the comparison.
• Shared Policy or Marriage-Year Situations: If you shared your marketplace health insurance with another person or throughout the year you got married to someone, the tax refund calculation gets complex, and you may trigger these IRS notices.

So, these are common reasons why the IRS sends you a CP06 or CP06A. Moving forward, let's know the supporting documents that you need to submit with these notices.

What Supporting Documents May Be Requested?

On the CP06 or CP06A notice itself, the IRS lists the required documents for the review process. Generally, the documents include:

• Form 1095 or Form 1095-A, Health Insurance Marketplace Statement. These forms show your insurance coverage details and advance payments you made towards your premium.
• Accurately filed Form 8962, comparing your already made advance payments against your claimed premium credit. This is based on your annual household income.
• Proof of your paid health insurance premiums. This includes your bank records, canceled checks, credit card statements, or receipts.
• If you shared your marketplace health insurance with someone else, or got married during the year, you need to provide additional documents, as the calculation is different in those cases.
• If your mentioned income needs confirmation, you also need to submit your income documents, i.e., Form W-2 (wage statement you received from your employer) or Form 1099 (statement for your other income types).

These are the supporting documents that are generally requested in IRS Notice CP06 and CP06A. Now, moving ahead, let's know how to respond to these notices.

How to Respond to CP06 or CP06A?

Here is how to respond to a CP06 or CP06A Notice:

Review the Notice Carefully

When you receive the CP06 or CP06A, carefully read it and understand why you received this notice and what it is asking from you. Additionally, check any changes stated by the IRS to your claimed tax credit or due tax amount.

Gather Supporting Documents

Gather all the requested documents mentioned in the IRS notice. This includes your Form 1095-A. Also, recheck the information mentioned in Form 8962 and the proof you submitted with your premium payments. In case you have submitted Form 8962 with your tax return, cross-check all the stated details in it, as one small error in it can trigger the notice.

Submit Your Response Before the Deadline

You have three options to submit your documents to the IRS:

• Using the Document Upload Tool, you can digitally upload the documents on the IRS website.
• Fax the documents to 855-248-1866 using an online fax service or a fax machine.
• You can also mail the documents to the address stated at the top of your notice.

Submit all the documents in one envelope, including the notice, so the IRS can match the information with your filed tax return. Additionally, do not mail your original documents to the IRS.

Additionally, respond to the notice within the given deadline, generally 30 days from the day you receive the notice. In case you do not respond to the notice, you do not receive the tax credit you claim on your marketplace health insurance premium. In addition, the IRS sends you an audit report stating the proposed changes and imposing any additional tax obligations, interest, and penalties you owe.

This is how you need to respond to IRS Notice CP06 and CP06A. Moving further, let's know what happens after your IRS notice response.

What Happens After You Respond?

Once you send the requested documents to the IRS, you get a letter from them stating the result of your audit:

• You receive the IRS letter stating that they have closed your audit if your submitted documents verify your claimed tax refunds.
• If you receive a CP06 notice, your hold refunds are released and processed further.
• If the IRS needs more information to verify your claimed premium tax credit, they will send you an updated tax audit report.

Further, if you need more time or information from the IRS, you can contact them at 866-897-0161. Know that the process takes time, so do not expect instant resolutions.

This is what happens after you respond to IRS Notice CP06 or CP06A. Moving forward, let's know what happens if you do not respond to the notice on time.

What If You Do Not Respond?

If you do not respond to the IRS notice within the given deadline, generally 30 days, you face the following consequences:

• The IRS treats your claimed refund as unverified, and you do not receive your claim refund on your premium tax credit.
• You receive a formal audit report from the IRS stating the proposed changes and any imposed tax, interest, and penalties you owe.

This further results in having more tax obligations than the claimed tax refund. You can still try to fix things up by responding to the notice along with a follow-up report. However, it is advisable to respond to the notice within the mentioned deadline.

Confused? Let's better understand this with an example.

So, this is why it is important to respond to the IRS Notice CP06 or CP06A on time. Now, moving ahead, let's know the common mistakes to avoid while responding to IRS notices.

Common Mistakes to Avoid

Common mistakes to avoid when responding to the IRS Notice CP06 or CP06A include:

• Know that you receive IRS Notice CP06 or CP06A for your premium tax credit only. These are not other broader review letters like IRS CP2000 or Letter 12C. Additionally, only send the requested documents.
• Before updating the changes in Form 8962, resending it will result in getting another tax notice.
• When sending documents through mail, always send copies, not the original documents.
• Missing the notice deadline because of slow international mail. If you know that the process will take longer, request this from the IRS. Additionally, for submitting your documents, you can also opt for other options such as Fax or an online upload tool.
• Always read the IRS notice carefully and check whether you are eligible for it or not. This is because sometimes, due to a system error, non-resident aliens get this IRS Notice CP06 or CP06A without being eligible for it.
• Not responding to the notice is the most common mistake made by many taxpayers, and then they face unnecessary tax obligations. If you are confused about not responding to the notice, call the IRS or seek expert assistance for IRS CP06A notice from tax professionals.

These are the mistakes you should avoid when responding to IRS Notice CP06 and CP06A.

Final Thoughts

Lastly, IRS Notice CP06 and CP06A are sent to verify whether your claimed premium tax credit on marketplace health insurance is accurate or not. Considering this, to get the refund and avoid any further tax obligations, it is vital to respond to the notice on time within the given deadline. Additionally, attach all the requested documents, such as Form 8962 and Form 1095-A.

Further, handling an IRS Notice CP06 or CPO6A is quite difficult, but with the right guidance, you can simply manage the process and resolve the issue. To help you out, at Savetaxs, we provide complete assistance to manage and address IRS notices on time and avoid delays. We have a team of professionals with years of experience in US taxes. So connect with us and solve your tax notices without any issues.