If you receive a CP2000 letter, it means that the Internal Revenue Service has noticed a difference between two things:
It's important to note that a CP2000 notice is no reason to panic. It's quite common to get one, and they don't always result in an increased bill.
The worst thing you can do when you receive a CP2000 is to ignore it, which will almost certainly result in additional penalties and interest.
IRS notice CP2000 is a letter from the automated underreporter (AUR) unit at the IRS. The AUR unit's computer systems automatically identify mismatches in reported income.
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. It might increase or decrease the amount of tax you owe or not change it at all.
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. It could also mean there was a mistake with some of the deductions and/or tax credits you claimed on your return.
The CP2000 kicks off a process called a correspondence audit, which usually ends in one of three ways:
Further reading: How an IRS Audit Works—and How to Prevent One
First, read your CP2000 carefully. On the right-hand side of the letter, under "summary of proposed changes," you'll see the following totals:
Review all of your W-2s, 1098s, and 1099s, and check all of the records you've received from your employer, bank, clients, and any other sources of income to make sure the proposed changes are correct.
If you need to review your tax return, you can always order a transcript directly from the IRS or partner with a service like 20/20 Tax Resolution. They offer TaxFacts reports that include IRS transcripts as well as any unpaid penalties or balances owed.
Next, you need to choose one of three courses of action:
Sign the letter and send it back to the IRS, which will send you an updated tax bill.
Your CP2000 might come with a response letter or form which explains the steps you need to take to approve and submit the proposed changes.
You can return your response by mail or fax to the return address or fax number printed on the notice. Use the return envelope if you're responding by mail, and make sure to keep a copy of the notice for your records.
If your CP2000 doesn't come with a response form, it might come with alternative instructions for responding to the IRS.
If you can't pay the full amount right away, you can set up a short-term payment plan or a long-term installment agreement with the IRS. Payment plans must be repaid in 180 days or less, while installment agreements require monthly payments. Visit the IRS website for more details on these options.
If you want to contest the proposed changes, complete and return the response form indicating that you disagree.
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.
If you want to talk to an IRS agent about your CP2000, call the phone number listed in the top right-hand corner of the letter.
Keep in mind that the IRS can only accept additional information and correct a mistake over the phone if the mistake doesn't increase or decrease your tax total. If it does, the correction needs to be made in writing.
Engaging with the IRS can be a daunting task for most of us, so it makes sense if this option feels a little overwhelming. In that case, you may want to seek help from an enrolled agent at a tax resolution company. These tax resolution specialists can help with any aspect of your taxes, including representing you before the IRS.
If you're not sure how to proceed, you might need a bit more time. Contact the IRS via the number printed on your notice for any deadline extensions or questions about the appeals process.
Here's a sample response letter to the CP2000 that you can download as a Word document.
If you've received a CP2000 notice from the IRS and need help sorting out your taxes, the experts on our Accracy Retro team can help.
Our Retro support gives you a dedicated team of historical bookkeeping specialists to make sure your prior financial records are complete and accurate, putting you in a better position to respond to the IRS and move forward with your business.
Once you understand your position with the IRS, we can also help you enlist support to deal with the IRS. A tax professional from our trusted tax resolution partner can help you navigate the CP2000 notice and any taxes owed from it. Book a free call to learn how we can help you navigate your CP2000 notice.
If you suspect there might be a problem with the information your employer or bank has sent the IRS, contact the business or person who reported the information to double-check.
If it turns out they sent the IRS the wrong information, ask them for a corrected document or a statement to support why it is in error, then send the IRS a copy with your response.
If you disagree with the proposed changes in the CP2000 and send the IRS information supporting your claim, the IRS should take between 30 to 90 days to send you its decision.
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.
Yes, you'll be on the hook for any additional interest you accrue in the process.
You have 30 days from the date printed on the letter to send your response to the IRS. (Keep in mind that you have 30 days to deliver the letter, not to get it in the mail.)
A CP2000 notice is automatically generated, so it isn't always perfect. In fact, there are plenty of stories about taxpayers receiving incorrect CP2000 notices that don't result in extra taxes.
If the information displayed in your CP2000 notice is correct, you generally do not need to amend your tax return. We recommend speaking to a tax professional anytime you are unsure if you need to amend or not.
If you choose to file an amended tax return, be sure to include it with your CP2000 response form. The IRS website recommends writing "CP2000" at the top of your return and attaching it behind your completed response.
If through this process you realize you may have made the same mistake in another tax return, file Form 1040-X, Amended U.S. Individual Income Tax Return to correct it.
Further reading: How to Double-Check a Completed IRS Tax Retun for Mistakes
Fraudulent CP2000s sent out by scammers impersonating the IRS have become more common in recent years. Sometimes referred to as "phishing" scams, these are usually sent over email and include a fake CP2000 attachment.
If you receive an email containing a CP2000 that you suspect might be a fake, forward it to phishing@irs.gov and then delete it from your inbox.
In some rare cases, getting a CP2000 might also alert you to the fact that someone else is using your name and Social Security number.
If you suspect you might be the victim of identity theft, contact the IRS and your state tax agency.
Once you respond to your CP2000, the IRS will send you a new, separate tax bill. You can pay it online at www.irs.gov/payment.
If you're unable to pay your full tax bill, you might want to explore a payment agreement with the IRS, a temporary delay in collection, or even an offer in compromise, which could lower your final tax bill.
The CP2000 response form also gives you the option of allowing someone in addition to yourself to contact the IRS about your CP2000. (You can also send the IRS a Form 2848, Power of Attorney and Declaration of Representative PDF to allow a tax professional to contact the IRS on your behalf.)
If you'd like help finding support in dealing with the IRS, Accracy can connect you to a certified enrolled agent who can handle the case on your behalf. Just access our accountant network and ask to be paired with an enrolled agent.
We are offering free 1 Month Basic Bookkeeping to all new customers so you can experience Accracy's seemless and professional services.
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