If you receive a CP10A Notice, the IRS believes you made a mistake on your Earned Income Tax Credit and this means that you owe more tax than you claimed. This also indicates that the refund you asked to apply towards next year’s estimated taxes is now lower. The IRS Notice CP10A is similar to three other notices named CP10, CP11 and CP11A. Generally, these notices mean that you made a mistake and owe more money. However, each of them has a slightly different purpose. While Notices CP11 and CP11A require you to pay the amount you owe immediately, notices CP10 and CP10A require you to check for your estimated taxes. The main difference between Notice CP10A and Notice CP10 is that the Notice CP10A means that you made a mistake on your Earned Income Tax Credit (EITC) while the Notice CP10 indicates other mistakes like mathematical errors in tax returns and you are required to check for your estimated taxes.

VERIFICATION OF THE CP10A NOTICE YOU RECEIVE

If you go to the official IRS website, you would see an example of how the notice looks like. You can also check the website for the phone number to call if you are not sure of the one provided on the notice. This is to avoid scenarios where you call the number and it goes directly to scammers.

The IRS sends CP10A Notices for miscalculations. It is possible you may have missed a step when completing your tax return, checked the wrong box, or entered information in the wrong line. Because you originally claimed a refund that is high enough to cover the additional tax, you don’t need to pay more now. However, less was applied to your estimated taxes for the next year, and you may need to make an additional estimated tax payment.

NEXT STEP– After verification, you will need to read the notice carefully and compare the information with your tax return for the year in question. Check the part that explains why the IRS believes there was a miscalculation on your tax return and why it was unable to apply the amount you requested towards your taxes for next year. If you see an obvious mistake you may have made and you fully understand why the IRS is right, you’ll likely want to go ahead and agree with the IRS. Once you have agreed with the explanation given by the IRS and revised amounts, you are required to correct the copy of your tax return that you kept for your records to reflect the changes that the IRS made to your return and also adjust the amount of future estimated tax payments you make to avoid the possibility of underpaying taxes for the next year.

You don’t always have to agree with the IRS. The IRS may not always be right. In addition, just because you made an error initially doesn’t mean you truly owe that tax. The IRS may agree that you don’t owe money after you fix the error and you supply additional information.

If taxpayers disagree with what the IRS sent in the notice, they can choose to either follow the instructions given on the CP10A Notice to respond back to the IRS, or they can hire an Enrolled Agent or other tax professionals to help them. Some issues require very simple fixes, while other issues are more complicated so whether taxpayers need help depend on how well they understand what the IRS changed in the notice sent and how comfortable they are in dealing with them. The job of the tax expert is to confirm that an actual discrepancy exists and, if one does, discuss how best to approach the IRS about it within applicable time limits (generally, you must advise the IRS of the discrepancy in writing within 60 days of the date on the CP10A Notice you received).  If the discrepancy is not handled properly, your tax return could be referred for audit. It is important to know that receiving notice CP10A means that there was a miscalculation on your tax return involving the Earned Income Credit that you claimed on that return, and this miscalculation affects the amount of estimated tax payments you want to be applied toward taxes you will owe for next year. This can affect any Income Tax Audits, income tax appeals or income tax litigations that you may be involved in.

HOW TO ADJUST YOUR ESTIMATED TAX PAYMENTS
If you are an employee, you generally make estimated tax payments through the amount of federal income withheld pursuant to the IRS Form W-4 on file with your employer.  If you need to make an adjustment to the amount that is withheld from your pay, submit a new Form W-4 to your employer.  If you are self-employed, you generally make estimated tax payments by submitting payment four times a year along with a completed Form 1040-ES.  Consult IRS Publication 505, Tax Withholding and Estimated Tax, for a good overview discussion on how to calculate withholding and estimated tax. However, it is recommended that you seek the help of a Certified Tax Professional.

To calculate your federal quarterly estimated tax payments for a particular year, you must estimate your adjusted gross income, taxable income, taxes, deductions, and credits for that calendar year. IRS Form 1040-ES includes an Estimated Tax Worksheet to help you calculate your federal estimated tax payments.

HOW TO MAKE FEDERAL QUARTERLY ESTIMATED PAYMENTS

The IRS provides several methods for making quarterly estimated tax payments:

• You can credit an overpayment on the tax return of the previous year to your estimated tax of the current year.
• You can mail your payment with payment voucher, and attaching the Form 1040-ES.
• You can also pay by phone or online. Instructions are provided on the form 1040-ES.
• You can pay via electronic funds withdrawal with your e-filed return.

NOTICE DEADLINE – 60 days from the day you receive the notice. If the IRS doesn’t get a response from you after 60 days, your case will be forwarded for audit.