If you don’t respond, the IRS will send you a Notice of Deficiency and charge you a penalty in addition to any additional taxes or interest you owe as outlined in CP2000. However, if you ignore this notice and do not respond within 30 days from the date of the letter, the IRS will issue a Statutory Notice of Deficiency and a bill for the proposed amount. Additionally, you will need to pay the understatement penalty, and interest will continue accruing on the amount you owe. Also, before responding to the CP2000 notice, you need to determine if you failed to report the income the IRS claimed you did not report. However, if the IRS’s math is correct, and you failed to report the income on record, you can check for deductions to lower the proposed amount. The Internal Revenue Service (IRS) sends this letter if the information on your return differs from the information the agency received from third parties.
Steps to Amend Your Tax Return
In fact, there are plenty of stories about taxpayers receiving incorrect CP2000 notices that don’t result in extra taxes. Usually, it means that you didn’t report all of your income properly. It could mean you underreported income for your self-employment taxes or freelance work you did as an independent contractor, for example.
Where can I get additional help?
Some tax professionals can predict CP2000 notices up to 6 months before the IRS sends them. They can do this by utilizing software that can help them quickly scan account transcripts for issues. The IRS inserts flags into a taxpayer’s account transcript showing that a taxpayer filed a tax return with unreported income. The IRS sends a CP2000 notice six months after they add code 922 to the account transcript.
Discrepancy Due to Identify Theft
Some tax professionals recommend submitting this, but others disagree, and the answer is often contextual. If you believe that the information on the IRS CP2000 notice is incorrect because someone is using your name and social security, file a Form 14039, Identity Theft Affidavit. You can find more information on the IRS identity theft information web page. To ensure you’re properly equipped for your tax professional appointment or your call with the IRS, these are the documents that will help you make your case. If your CP2000 doesn’t come with a response form, it might come with alternative instructions for responding to the IRS. When the IRS sends you a CP2000 notice, the agency allows you to review the discrepancy and explain why you disagree with the notice.
What are my next steps?
Even if you agree with the proposed changes, you can ask the IRS to remove the penalties from your balance. If you provide a reasonable explanation for underreporting your income, the IRS may grant your request for penalty abatement. The IRS typically includes a response form with the CP2000 notice you must complete and submit. If you did not receive a response form, you need to follow the instructions on the notice. Responding to a CP2000 notice in time is crucial, regardless of whether you agree with the proposed changes. By responding to this letter in time, you can avoid the substantial understatement tax penalty that the IRS lists under the proposed changes.
If the changes are correct and you agree with the CP2000
Upon receiving tax records from third parties, such as your bank or employer, review them carefully to ensure they are accurate and that you report your income correctly. Under a monthly installment agreement, you can make monthly payments towards your tax debt, making this liability more manageable. To apply for an installment agreement, complete and include Form 9465 (Installment Agreement Request) when responding to the CP2000 notice. A CP2000 notice indicates that the IRS proposes a change to the tax, payments, or credits you reported in your original return.
- We received information from a third party, such as employers or financial institutions, which doesn’t match the information you reported on your tax return.
- The “as corrected by IRS” and “Difference” columns will reflect the $6,000 you did not report.
- It could also mean there was a mistake with some of the deductions and/or tax credits you claimed on your return.
- Accracy is not a public accounting firm and does not provide services that would require a license to practice public accountancy.
- Filing online can help you avoid mistakes and find credits and deductions you may qualify for.
When you’ve put in hours of work into preparing and filing your 1099 information forms, the only thing you look forward to is a clear report from the IRS. But those what is a cp2000 notice hopes are squashed quickly when the IRS hits back with a CP2000 notice. This notice or letter may include additional topics that have not yet been covered here.
- It’s quite common to get one, and they don’t always result in an increased bill.
- In a nutshell, when there is an income information mismatch in the returns filed by you and the information that IRS already has on file, the AUR generates an automatic CP2000 notice.
- If you don’t respond, the IRS will send you a Notice of Deficiency and charge you a penalty in addition to any additional taxes or interest you owe as outlined in CP2000.
- Do not let a mistake, fraudulent activity, or administrative issues affect your financial security and peace of mind.
- Below we have sample CP2000 response letters that you can use to edit and send out for your response.
Our computer systems match the information you report on your tax return to information reported to IRS by third parties, such as, financial institutions, employers, and other businesses. Due to the complexity of the matching process, it can take months to complete. Provide a signed statement explaining why you disagree and supply any documentation to support your statement. Send it (along with the response form) to the IRS address printed on the CP2000. Receiving a CP2000 notice could mean that you forgot to report a source of income—maybe you filed your taxes before receiving all of your income statements—or that the IRS system has made a mistake.
- Remember that at this point, any further proceedings on your tax reports or changes will be determined by the Court.
- The notice explains what information we used to determine the proposed changes to your tax return.
- If you don’t agree with all the proposed the changes, mark the appropriate box on the Response form and send it to us along with a signed statement explaining why you disagree.
- We can generally accept your information over the phone for incorrectly reported information.
- Moreover, if a taxpayer has a change on a federal tax return then most likely they need to submit an amended state tax return (if applicable).
- Upon responding to the CP2000 notice with your explanation, you can expect to wait up to eight weeks for a response from the IRS.
