October 28th, 2022 in Tax Law
I received IRS notice CP2000. What do I do? You received the Internal Revenue Service (IRS) Notice CP2000 because there was a discrepancy between what you reported to the Internal Revenue Service and what was reported to the Internal Revenue Service by third parties. The IRS receives information from third parties about the amount of income you receive. Your employer informs the IRS the amount of wages that are paid to you when your employer files your W-2 form. If you are an independent contractor, the IRS receives Form 1099 which reflects the income you received. If you sold a house during the year, the amount of the sale is reported on Form 1099-S. If it appears there was income that was reported to the IRS but not reported on your tax return, the IRS will mail a Notice CP2000.
IRS Notice CP2000 outlines the discrepancy and additional taxes, penalties and interest you may owe for the missing income. Notice CP2000 is not an audit. It merely lets you know your file has been red flagged and the IRS requires additional information to clear up the issue. It is merely inquiring about the underreported income. Receiving IRS Notice CP2000 does not mean you owe the taxes listed on the notice.
IRS Notice CP2000 is computer generated. Many taxpayers who receive the notice do not owe additional taxes. You will need to respond to the notice. The response will be either you agree with the notice, partially agree and partially disagree or disagree. The information that will need to be included in your response vary depending the specific type of income being addressed in the notice.
Gather Your Documentation
Review the notice. Review your tax return to validate whether you already reported the income on your return. To do that, you will need to gather all of the reports received under your social security number such as W-2, 1099, etc. If you no longer have that information in your possession, you can contact the IRS to request a copy of your Wage and Income Transcript. Comparing the actual documents (or the transcript) to determine if you agree, partially agree or disagree with the CP2000 Notice.
Responding to the CP2000 Notice
If you agree with the notice, then you will reply to the notice that you agree. If you are able, send in a payment with the response. If you are unable to pay the amount you owe, you can request other payment arrangements.
If you partially disagree, you can contest the notice. You respond to the notice with the documentation to support your position.
If you disagree, it is the same process as if you partially disagree. Along with the response to the notice, you send the documentation to support your position.
IRS Response
After sending in the response to the IRS, you will need to wait for the IRS’s written response. It will generally take at least 8 weeks to receive a response. If you do not agree with the IRS response, you can still appeal the IRS’s decision. If you do not receive a written response after 8 weeks, follow up with the IRS by phone. Continue to follow up every 30 days until you receive the IRS’s written response. When you receive the IRS”s response, read the response carefully to see if the issue has been cleared up. If you disagree with the IRS’s decision, file an appeal.
It is important also to review your more recent filed tax returns to see if the same issues exist. If you realize the same problem exists on the more recently filed tax return, you can file an amended tax return. This may result in a accuracy penalty of 20% not being assessed against you.
