The information in this article is up to date through tax year 2019 (taxes filed in 2020).
When the IRS has conflicting information between your reported income (like forms 1040 or 1099) and what you submitted on your tax return, you may receive an IRS notice CP2000. This document outlines any discrepancies and additional taxes that you owe.
IRS notice CP2000 isn’t, in itself, an audit. It’s more like a notice that the IRS has red-flagged the information for your social security number.
Just because you received IRS notice CP2000 doesn’t mean that you must necessarily pay the amount listed. You have options for accepting or appealing the notice. Here’s what you need to know.
Consult a tax professional
Unless you’re familiar with tax codes, you’ll probably want to consult a tax professional to review your CP2000 notice. Since these notices are computer-generated, it’s possible, even likely, that you won’t have to pay anything extra.
These changes may even result in you qualifying for additional deductions or credits, so work with a tax professional or tax filing platform, like TaxSlayer, to promptly address the notice.
What do I need to do?
The first thing you need to do is gather all of the income documentation associated with your social security number. It’s best to hold on to these documentations for several years after you receive them but if you don’t have access to them or fear that you left something off, you can request a Wage and Income Transcript from the IRS.
This transcript will outline all income reported to the IRS according to information they’ve received on wages, retirement distributions, and all other income sources. Compare this information with what you included on your tax return to determine whether you agree, partially agree or disagree with the notice.
Next, you’ll need to prepare your response to the IRS.
How do I respond to a CP2000 notice?
Comparing all of your income documentation and your filed tax return, you’ll respond in one of three ways: agree, partially agree or disagree. The information you’re required to include in your response varies for each type.
If you agree with the CP2000 notice, then you’ll send the CP2000 response form back to the IRS along with payment for the outstanding amount, if necessary. You can also request to leverage an installment agreement to pay your balance if you can’t afford to pay in full.
If you agree with some of the CP2000 notice, but not all of it, then you can contest. Along with your CP2000 response, you should mail in any documentation that confirms your position. You have the option of also including a corrected tax return.
The process for partial disagreements and full disagreements is the same. Along with the CP2000 response that you send back to the IRS, explain the discrepancies and include any documentation that supports your claim.
When you contest your CP2000 notice, whether a partial disagreement or full disagreement, remember that you can file a corrected tax return but only file an amended one if you have additional income, credits or expenses to report.
What happens next?
After you’ve sent in your response, the IRS will either accept or reject it. Contact the IRS around eight weeks after responding to find out.
The IRS will correct your tax returns if your CP2000 response is accepted. If this means that you owe more, then you’ll be responsible for either paying the amount in full or setting up an installment plan.
You may also want to review past years’ tax returns to determine if the same mistake has been made before. File an amended return for these scenarios to avoid paying an additional 20% penalty for inaccuracy.
CP2000 notices that are rejected can still be appealed, although this can be a lengthy process. Final rejection of your CP2000 response means that you are responsible for paying any additional taxes as well as any penalties that may apply.