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.