Understanding Your IRS CP2000 Notice
Getting an unexpected letter from the IRS can be intimidating. People tend to freeze up as soon as they see the agency’s seal on an envelope.
But there’s no need to panic when you get a communication from the Internal Revenue Service.
When you’re familiar with some of their most common notifications, it can remove much of the fear surrounding the agency.
A common notice to receive from the IRS is a CP2000.
Today, we’ll talk about what such notices mean, and how to respond to them.
What Is a CP2000?
An IRS Notice CP2000 is sent to taxpayers when there is a discrepancy between the information on their tax return and data reported to the agency. This notice informs the taxpayer of this difference and provides instructions for resolving the inconsistency.
A CP2000 is not a notification of an audit; you are not automatically being audited if you receive one of these letters.
Nor is it a bill.
Rather, it’s a notice of proposed changes to your tax return.
These letters are computer-generated and are created when IRS algorithms note a difference between amounts tallied on a tax return, and those reported to the IRS. Employers and financial institutions make annual reports to the agency, and if their information contradicts an individual’s return, a CP2000 is created.
The notice will detail the differences between your submitted tax return and the information the IRS has on file. It will also contain a proposal to amend your tax return to reflect their records.
The IRS may request additional tax, propose a partial refund, or there may be no monetary change at all. Regardless, you should review the proposed changes to see if you agree with their assessment.
These disparities are generally easy to remedy and are due to small errors like typos. Once you respond to the letter, the issue is often resolved. But delaying your response or ignoring the notice could lead to complications and penalties.
Usually, the deadline to respond is 30 days from the issue date printed on your letter. If you have any questions about the notice, you can call the listed IRS phone number for further information.
What To Do When You Receive a CP2000 Notice
Before you respond to the CP2000 notice, you should review your financial information for the year in question to see if you agree that the proposed changes are correct.
Gather any relevant documents from that year, such as your copy of your tax return, W-2s, 1099s, healthcare form 1095-A, student loan interest statement 1098-E, receipts from charitable donations, and more.
Review your records and compare them to your tax return.
Did you report all your income for the year? Are all your deductions accurate?
If you do not have a copy of your return, you can request one from the IRS by submitting a Form 4506-T, or Request for Transcript of Tax Return. Alternatively, a tax professional can do this for you.
How to Respond to a CP2000 Notice
Whether or not you agree with the proposed changes to your tax return, you must respond to the notice.
Most CP2000 notices arrive along with a response form. If you believe the proposed changes are accurate, follow the instructions on your response form and indicate you agree with the amended return. If you and a spouse file your taxes jointly, they will also need to sign the response form.
You can place your response form in the provided envelope and mail it to the IRS, or fax it to the provided number.
It’s important to note that the IRS occasionally experiences delays in processing mail. Last year, during the height of the COVID-19 pandemic, millions of pieces of mail sat unopened for months.
You can avoid this problem by faxing your response to the appropriate office.
If your CP2000 notice does not contain a response form, follow the instructions on your letter to notify the IRS of your decision.
If you owe additional taxes due to the changes proposed by the IRS, you can pay the bill online. Visit IRS.gov and choose “direct pay” to submit your payment.
What Should I Do If I Disagree with The CP2000 Notice?
If you disagree with the changes proposed by the IRS, contact any businesses, institutions or individuals that provided incorrect information to the IRS so they can rectify their error. Ask them for a document that corrects the error.
Record your dissent on the response form included with your CP2000 and return it to the IRS. Include a signed statement that details you why the proposed changes are incorrect. You should also include and documentation that supports your claim, including the corrected documents you received from the businesses you contacted.
Frequently Asked Questions About IRS Notice CP2000
What if the notice is wrong because someone else is using my social security number?
If you believe that someone is fraudulently using your name or social security number, you can download a Form 14039, Identity Theft Affidavit, from IRS.gov. Fill it out, and include it along with your response form, indicating that you believe you are the victim of identity theft.
What will happen if I don’t respond to the notice?
If you do not respond to your CP2000 notice, or if the IRS cannot accept your initial response, the agency will issue a notice CP 3219-A, Statutory Notice of Deficiency.
This letter will contain further details about the IRS’s proposed changes. It also provides details for how the taxpayer can challenge the decision in Tax Court. It is important to file a tax court petition by the deadline date if you do not agree. While it is possible to correct the issue after the deadline has passed by doing an audit reconsideration or Offer in Compromise Doubt as to Liability, the Taxpayer has the best chance to correct the issue in tax court, whereas the later two options are open to IRS discretion.
Will receiving a CP2000 delay my tax refund?
Usually, these notices are generated well after the April filing season, and any refund that was due to you will have already been issued. However, that is not always the case.
You can mitigate any complications by promptly responding to your CP2000 notice. By responding to a first notice, you will prevent the issue from escalating to a bill for overdue taxes that could impact your future returns.
What if I cannot pay additional taxes owed?
If the proposed change to your tax return would require additional tax payments that you cannot afford, you should visit IRS.gov to learn about your repayment options.
On IRS.gov, you can learn about payment plans and installment agreements, which will allow you to pay your tax bill over time. You may also be eligible for an Offer In Compromise if you cannot pay the full amount owed.
Additional Information on CP2000
Once you have responded to your CP2000, there are some other steps you can take to ensure that you don’t run into a similar problem again.
First, make sure your other tax returns don’t contain the same error. If an employer or vendor incorrectly recorded your financial information, they may have done so previously. If you find the same error on other returns and you are still within the three year window for an audit, file a Form 1040-X, Amended U.S. Individual Income Tax Return, and submit it to the IRS. It may be in your best interest to file an amended return before the IRS issues a CP2000 as once the IRS makes the changes to your return, the IRS can assess an additional 20% accuracy related penalty.
Make a copy of your CP2000, as well as your response form, and store them along with your copy of your tax return for your records. If you agree that your tax return should be amended, make sure you also keep a copy of your updated return.
IRS CP2000 Scams
Remember that the IRS will only ever make first contact through the mail. If you receive a phone call from someone claiming to be from the IRS informing you of an issue, but you have not received a letter with the same information, it is likely a scam.
If you ever have questions about the validity of an IRS communication, you should visit IRS.gov and see if the notice is recorded on your account.
CP2000 Atlanta Tax Attorney
IRS communications can be overwhelming, and it can help to have a professional handle any complications. If you’re having trouble understanding your CP2000 notice or need to file a tax court petition in response to a missed CP2000 deadline, contact a tax attorney.
If you live in Atlanta and have a question about any IRS communication, contact Alyssa Maloof Whatley right away for a consultation.