IRS Notice CP79 | Denied Credit on Tax Return

February, 14 2025 by Veselina Arangelova, EA

Every year, you spend hours preparing your tax return, combing through, compiling, and submitting all the information you believe is of utmost importance to the IRS. You report your income and expenses and share the details of your family situation. For example, maybe you have children, someone in your family goes to college, or you have started a business. These situations may qualify you for an additional credit or two, which can significantly impact your refund.

Then comes a mysterious letter in the mail; it is from the IRS. This is never a happy occurrence unless it contains your refund check, of course. If you are one of the many Americans who have received a letter from the IRS letter before, you know the feeling I am about to describe. Thousands of thoughts run wild in your mind, and you wonder: Why you, why now?

We know from years of experience that an audit can feel incredibly intrusive, and it does make most people very uneasy. It is important to remember, however, that an audit seeks to verify the information provided on your return. Based on the information provided and your personal records, an examiner may make changes to your original return.

If you have never dealt with the IRS before, it can be confusing to navigate this new territory. To make it worse, some IRS letters can be intimidating and not always clear about what comes next. But have no fear; this blog is just what you need.

One such notice a taxpayer may receive is the infamous CP79. This IRS notice has two variations - a CP79 and a CP79A. The difference may seem subtle, just a letter “A,” but make no mistake, it is not a misprint. It is important to note which one you have in your hands to better understand what is next. We will discuss both, so keep reading.

The CP79 notice comes after an audit of one (or all) of these credits: the Earned Income Tax Credit, the American Opportunity Tax Credit, the Child Tax Credit, the Additional Child Tax Credit, and the Credit for Other Dependents. Some of these credits are known as refundable credits – the exception to this is the Child Tax Credit and Credit for Other Dependents, which are non-refundable. These credits benefit taxpayers greatly and, for that reason, they tend to get audited more frequently.

A closer look at CP79

If, upon the conclusion of an audit, you end up with changes to your return and the credits you claimed, a CP79 will be sent to you. A CP79 serves as an important reminder that the next time you claim a credit that was previously reduced or disallowed after an examination, you will need to file Form 8862, Information To Claim Certain Credits After Disallowance with your tax return.

This isn’t a notice you need to respond to, so immediate action is not necessary. However, read the notice carefully and make sure to keep a copy of the notice handy for when you file future tax returns.

A closer look at CP79A

Now that you know what CP79 is for, you may wonder why the IRS needs Notice CP79A. A CP79A is the harsher of the two notices because of the two or ten-year credit ban that may be applied to you. If the IRS determines your claim for any of the credits listed on your CP79A was reckless or you intentionally disregarded the law and the regulations, then you won’t be able to claim those credits for the years listed on the notice, even if in those tax years you are eligible for them.

Generally, the IRS will impose a two-year disallowance period if they determine there was a reckless or intentional disregard of the rules. The IRS may impose a ten-year disallowance period if they determine fraud was involved. If you are disallowed from claiming a credit, the notice will inform you of the next tax year you are eligible for that credit. This may sound very unfair, but it is necessary to prevent people from claiming credits they may not be eligible for. If the IRS imposed a disallowance period, keep a copy of the notice handy when you prepare your taxes as the disallowance can apply to one or more credits.

After the disallowance period expires, you will need to submit Form 8862 to the IRS with your tax return if you want to claim one of the previously disallowed credits on a future individual income tax return. It is the agency’s advice to keep your filing simple – just your return with Form 8862 in it. Any additional documents you may want to send to prove you are eligible for the credit are unnecessary. Documents not requested by the agency slow down the processing of returns. If information is needed, you will receive a letter with specific instructions to follow.

In some instances, you may disagree with the audit or its outcome. If this happens, you may request an Audit Reconsideration and send the IRS the documentation needed to support your claim. After all, the IRS's mission is to provide America’s taxpayers with top-quality service by helping them understand and meet their tax obligations and by applying the tax law with integrity and fairness to all. If you believe an Audit Reconsideration is what you need, you can read more about it in this blog post.

If you have received an audit or notice and have a membership with TaxAudit for the year in question, our world-class tax professionals will be here to represent you to the IRS every step of the way. Or, if you have tax debt and are unsure how to resolve it, our Tax Debt Relief team offers a no obligation consultation to see what we can do to assist you. Whatever your situation might be, we are standing by and ready to help.