What the notice means
All three IRS pages open the same way: “We corrected your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account.” The CP23 continues, “You have a balance due because of these changes.” The CP24 says “You may have a credit because of these changes” and that the remaining refund should arrive “within 4-6 weeks, as long as you don’t owe any other taxes or debts we’re required to collect.” The CP25 says “You’re not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.”
IRM 3.14.1.6.12 defines the three by result: “CP 23 - ES discrepancy with a possible math error on a balance due module of $5 or more,” “CP 24 - ES discrepancy with a possible math error on an overpaid module of $1 or more,” and CP 25 for a module “with an even balance, a balance due of less than $5, or an overpayment of less than $1.” Each page notes that the notice “may also cover other changes we made while processing your return,” which is where a true math error can ride along.
Why the client got it
IRM 3.14.1.6.13 states the trigger: “An ES discrepancy notice generates when the amount of estimated tax (ES) payments claimed by the taxpayer differs by $1 or more from the estimated tax total shown on the notice tax module (CC TXMOD).” The payments counted include estimated tax payments, credit applied from a prior year or paid with an extension, and the prior-year credit elect, which the IRM says “is considered a timely filed Estimated Tax Payment.”
The IRM then lists what reviewers look for, and the list is a good diagnostic for the practitioner:
- “A potential ‘double credit’ where the taxpayer incorrectly entered ES payments on the withholding line, or combined ES payments with withholding in the line entry.”
- Transcription errors, where a payment was “erroneously transcribed” as withholding or another credit.
- “Unclaimed payments that post to the wrong account,” verified through the Remittance Transaction Research system or EFTPS. A fourth-quarter payment made in January and intended for the prior year, a payment under a spouse's SSN after a divorce, or a payment designated to the wrong year online are the typical cases.
- EFTPS payments misdirected to the shared responsibility payment account (MFT 35) instead of the income tax account (MFT 30).
- A payment recorded under the wrong transaction code, which can produce a notice even when no real discrepancy exists.
The IRS CP23 FAQ gives the same answer from the taxpayer's side: “The most common cause is an incorrect entry on the estimated tax line of the tax return.” Before filing next year, the pages suggest checking the payments posted to the year in the client's Online Account; a practitioner can do the same on the account transcript through TDS.
Deadlines and what happens if they pass
| Item on the notice | Right it carries | Clock |
|---|---|---|
| Estimated payment correction | No abatement right; dispute by showing the payment was made | Pay by the notice date to stop failure to pay penalty and interest (CP23) |
| Math error correction (if any) | Request abatement; IRS must abate and reassess under deficiency procedures | 60 days from the notice date (IRC 6213(b)(2)(A)); postmark controls |
| Balance due not paid | Collection notices follow (CP501, CP503, CP504) | Levy barred during the 60 days on the math error portion (IRC 6213(b)(2)(B)) |
| Refund reduced (CP24) | Remaining refund in 4 to 6 weeks; refund hold on larger changes | IRM 3.14.1.6.12.6.6 |
The distinction matters. IRM 21.5.4.2.1 says the following “are not considered mathematical/clerical errors for purposes of the 60-day abatement request,” and the first item is “A correction to withholding or estimated tax payments.” So the estimated payment adjustment on a CP23 is a credit correction: the remedy is to prove the payment, not to demand abatement. If the notice also changed tax because of a math or clerical error, IRM 21.5.4.3 applies: “IRC 6213(b)(2)(A) allows the taxpayer 60 days from the date of the math error notice to request abatement of the additional tax specified in the notice,” and “An abatement request may be written or oral.” On a timely request “the IRS must abate the assessment” and, if it still disagrees, proceed through deficiency procedures (IRM 21.5.4.3.2). See CP11 and CP12 for the pure math error notices.
IRM 3.14.1.6.12.6.6 explains a CP24 timing quirk: “IMF systemically imposes a refund hold on all refund CP 24s when a change +/- $1000 or more of tax, balance due or refund,” so that Notice Review can intercept an erroneous refund before it goes out. A large CP24 refund can therefore lag the notice.
How to respond
- Compare the payments listed on the notice to the client's records: bank statements, EFTPS confirmations, Direct Pay receipts and canceled checks. The IRS pages ask the taxpayer to “Verify we listed all your estimated tax payments” and “Check the payments we applied (if any) from the prior year.”
- Check the prior year's account transcript for the credit elect (TC 716 or TC 710 on the current year) and the current year for each TC 660 or TC 670. A payment that shows on a different year, the spouse's account or MFT 35 is the usual explanation for a missing one.
- If the IRS is right, the pages say to pay the CP23 balance by the due date, correct the client's copy of the return and not to file an amended return for this change. A CP24 or CP25 needs no response if the client agrees.
- If a payment is missing or misapplied, call the number on the notice with the return and proof of payment. The CP23 FAQ: “We'll discuss the issue with you and give you further instructions.” A payment that can be located is transferred by credit transfer, and the FAQ confirms that when the IRS fixes a misapplied payment “the late payment penalty and interest will adjust automatically.” If the payment cannot be found, a written payment tracer with a copy of the canceled check (front and back) or the EFTPS trace number is the next step.
- If the notice also contains a math error the client disputes, request abatement within 60 days of the notice date, in writing to the address on the notice (keep proof of mailing; the postmark controls). State which item is disputed and attach support. Treat the request as the start of a protest.
- If the client cannot pay a CP23 balance, set up a payment plan; see installment agreements. Interest and the failure to pay penalty run from the original due date on the corrected balance.
- If other items on the return need correcting, the pages say to file Form 1040-X; see amended returns.
IRM 21.5.4.3.2 tells adjusters: “Do not recompute Estimated Tax (ES) penalties because the ES penalty computation is based on the original tax shown on the present or preceding year tax return.” A corrected payment history can still change the IRC 6654 penalty, because the penalty depends on when payments were made; raise it specifically if the penalty on the notice looks wrong. See the estimated tax penalty.
What the IRS does next
Notice Review has already looked at the module once. IRM 3.14.1.6.13 directs the reviewer to verify payments with RTR or EFTPS, to check IRPTR for withholding, and to allow excess credit to refund in defined situations: a prior-year credit elect, a timely payment that is one quarter of the current or prior year liability, total payments that equal 90 percent of the current or 100 percent (110 percent above $150,000 of prior AGI) of the prior year's tax, or a payment history of similar amounts. The reviewer can also convert a CP23 to a CP24 or CP25 if a located credit changes the balance.
After the notice, a CP23 balance that is not paid follows the ordinary path: CP501, CP503, CP504 and then levy notices. A math error abatement request within 60 days reverses the assessment; IRM 21.5.4.3.2 says that without substantiation the case goes to Exam Classification, and if a notice of deficiency follows the client can petition the Tax Court. A payment located and transferred reverses the balance and the related penalty and interest systemically.
Related notices
- CP11 and CP12: math error notices without a payment discrepancy.
- CP14: the first balance due notice when the return itself showed tax owed.
- CP22A: changes made after an adjustment request.
- CP2000: income discrepancies, as opposed to payment discrepancies.
Questions practitioners ask
Does the 60-day math error rule apply to a CP23?
Only to a math error item on the notice. IRM 21.5.4.2.1 says a correction to withholding or estimated tax payments is not a math error for the 60-day abatement request. The payment correction is disputed by proving the payment.
The client paid the fourth installment in January and the IRS applied it to the new year. What now?
Call the number on the notice with the payment confirmation and ask for a credit transfer to the correct year. The IRM has reviewers look at later-dated payments for taxpayer intent; a January payment for the prior year is a recognized pattern.
Should we file a 1040-X to fix the estimated payment line?
No. The IRS pages say to correct the client's copy only. Form 1040-X is for other corrections to the return.
Why did the CP24 refund not arrive with the notice?
IRM 3.14.1.6.12.6.6 describes a systemic refund hold on CP24s with a change of $1,000 or more so Notice Review can intercept erroneous refunds. The pages say to allow 4 to 6 weeks.
Can a CP23 be appealed?
The payment correction has no appeal right of its own; if the IRS will not credit a payment the client can prove, the remedies are a payment tracer, TAS if the delay causes hardship, and ultimately a refund claim once the balance is paid. A math error item has the 60-day abatement route into deficiency procedures.