With the ominous opening line of "Message about your [year] tax return - We're holding your refund until we finish reviewing your tax return", IRS Notices CP05, CP05A & CP05B all indicate that the IRS is reviewing your return. The IRS might also use Letter 4464C. With Notice CP05 they don't request anything of you until they have finished their review of your return. Notice CP05A asks you to supply the IRS with documentation to support certain items on your return. With Letter 4464C they ask you to wait 60 days until they complete a review.
Respond to Notice CP05
The IRS explanation is often very vague. So, you'll have to trace exactly the line on your return being questioned & prove that item. First, call the IRS at 1-800-829-1040 (wait on hold for a very long time) and order your Wage and Income Transcripts. These documents tell you what 3rd party documents were sent to the IRS for you. You can then trace the item being questioned by the IRS and compare it to your return so you can gather evidence to offset or eliminate the IRS proposed assessment.
If the IRS doesn't believe the evidence is sufficient, you can Appeal the decision within the IRS. If you do nothing or if your Appeal is unsuccessful, the IRS will issue you a Notice of Deficiency & you'll have an opportunity to go to Tax Court.
In any event it is best to seek legal advice during this process. Please follow the Return Error Prep Steps & call for an appointment!
Various IRS Notices CP05:
IRS Notice CP05A:
