Notice CP40 - Refund Applied to Debt

Type: Refund Offset | Level: medium

IRC Section: IRC § 6402

Response Deadline: N/A

The IRS took your refund and used it to pay off another debt you owe the federal government. It could be a prior-year tax balance, a defaulted student loan, or another federal obligation. The notice tells you exactly how much was taken and where it went.

A CP40 notifies you that the IRS applied your tax refund to a past-due federal debt — such as a prior-year tax balance, federal student loan default, or other federal obligation. The notice explains how much of your refund was applied, to which debt, and the remaining refund (if any) being sent to you.

Common Triggers

• Past-due child support
• Federal agency debt
• State tax debt

Resolution Steps

1. Step 1: Review the offset amount and debt type
2. Step 2: Contact the agency that received the offset
3. Step 3: Contact us if you disagree with the offset
4. Step 4: Consider adjusting withholding
5. Step 5: Keep this notice for your records

Common Questions About CP40

Can I stop the IRS from taking my refund for old debts?

For prior-year tax debts, the IRS can offset your refund without a court order. For other federal debts (student loans, state debts), the Treasury Offset Program handles the interception. You may be able to dispute the underlying debt, but the offset itself is difficult to stop once initiated.

What if the debt the IRS applied my refund to isn't mine?

If the debt was assessed in error, or you've already paid it, you can dispute the offset. Contact the agency that claimed the debt (not the IRS — they only execute the offset) and request a reversal. This is common with student loan servicing errors.

Related Notices

• Notice CP14

Additional Resources