What is a CP2000 Notice
The CP2000 Notice from the IRS is generated when the income or payment information that the IRS has in their records does not match the information that was reported on the taxpayer's tax return.
The Notice indicates that the income on the tax return was ‘underreported' and that there is a proposed additional amount that is owed by the taxpayer. These notices are computer generated and are not reviewed by a human before they are mailed to the taxpayer.
The IRS has an Automated Underreporter (referred to as “AUR”) program whereby they match up and compare the income reported on your tax return with that of information that they receive from third parties. Third Parties are required to file informational returns to the IRS,
The most common example would be your W2 from your employer. Your employer is required to provide the IRS with a copy of your W2. If the wage income you report on your tax return does not match up with wage income on the W2 that they have on file, then a CP2000 Notice will be generated.
Not a Bill
The CP2000 Notice is not a tax bill but simply a notice on the ‘proposed amount' that will be due to the Service. The Notice will detail each item of income that you reported on your tax return that does not match up with their records and will have the due date of your response.
Steps To Take
It is very important that you respond to the IRS by the due date disclosed on the notice. As failure to respond by the designated date will result in the service filing a ‘Notice of Deficiency' for that tax year. Even if you do not have enough time to research or respond in writing to the notice, you should call the IRS and indicate you would like another 30 days to respond to the notice.
The worst step that you can take is to ignore the notice as this will make correcting the problem even more difficult. If you do not respond to the initial Notice, then the IRS will issue a Notice of Deficiency
It is very important that you document all of your calls and correspondence with the IRS and make sure you write down the badge number of the agent you speak to on the phone.
If you disagree with notice
If you disagree with the CP2000 Notice you should provide a detailed written response as to why you disagree along with any supporting documentation. If the information reported to the IRS by a third party is incorrect, then you should contact them and request that they provide a corrected document to the IRS. For example, if the W2 that your employer sent to the IRS is incorrect, then your employer can file an amended W2 with them. In the event that a corrected document cannot be obtained from the third party, then you can always have them prepare a letter or affidavit to support your statement.
Do not file an Amended Return
If as a result of the notice you determine that some information on your tax return was not correct, do not file an amended return. If an amended return is filed as a result of a CP2000 Notice, then the IRS internally sends the amended return to a different department (not the department that runs the AUR program). This will ultimately delay the resolution of the matter.
If you agree with the notice
If you review your records and agree with the CP2000 Notice, then there will be a section on the notice to indicate you are in agreement with the ‘proposed revisions'. You will have to sign that you are in agreement and include your contact information. The service will then adjust your account and send you a billing notice for you to submit payment.
Often a CP2000 Notice is not correct
It is estimated that anywhere from 40% to 60% of the CP2000 Notices that are issued are incorrect.
It is not that uncommon for a taxpayer to receive a CP2000 Notice from the IRS. Yet to correctly resolve the matter it can be very time consuming process.
At our law firm we help individuals on matters like this on a daily basis so if you have any questions on a notice that you received please contact our firm.
