The IRS sends a CP2000 notice if it believes that you under-reported your income. Essentially, the IRS compares your tax return to the information received from third-parties (i.e., Forms W-2, 1099, etc.) and determines if the numbers match. While it’s always scary to receive an IRS notice, there are several simple steps you can take to address the issue.
How to Solve an IRS CP2000 Notice
There are four main steps to solving an IRS CP2000 notice.
- Check Your Records
Before you respond to the IRS, it’s important to check your own documents to determine you have filed correctly. Gather all your documents that report your income such as Forms W-2 and 1099 and make sure they have all been included on your tax return.
If you find that you made a mistake and not all income was included on your return, work with your accountant or tax return preparer to determine the additional tax you may owe. Don’t forget to factor in all relevant deductions and withholding. - Respond to the IRS
In the event you do owe taxes on unreported income, simply send the IRS CP200 notice response with the new payment. If you can’t pay the full amount, include a request for an installment agreement to pay off the difference. Note that you may be subject to penalties for filing incorrectly.
In the event you believe the IRS is wrong, reply to the CP200 notice with documentation that proves your position. In cases where the IRS is partially wrong, it’s often helpful to include a corrected tax return, but do not file an amended tax return. The IRS will either agree or disagree with your response. If the IRS disagrees with your response, the IRS will send you a Notice of Deficiency which gives you a 90-day opportunity to contest their determination.
Before you file a petition with the U.S. Tax Court , it’s highly recommended that you consult with an experienced tax attorney. A tax attorney can evaluate your case and determine if you have a viable case. This can save you valuable time and money. A tax lawyer may also be able to suggest options or alternatives to a Tax Court litigation. - Disputing the IRS Determination
When contesting a Notice of Deficiency, it’s imperative that you have a clear understanding of the tax system. Hiring a tax attorney to represent and advise you is imperative if you want to successfully dispute an IRS determination. Provide your tax lawyer will all relevant information regarding the case such as:- IRS CP2000 notice
- Any correspondence with the IRS regarding the notice
- Tax return for the contested year
- Tax returns of the previous and following year of the contested return
- W-2s and 1099s
- Deductions/expenses that can be applied to the unreported income
- Any other IRS CP2000 notices you’ve previously received
- Listen to Your Tax Attorney
Once your tax attorney has an understanding of your case, they can provide options moving forward and how to best contest the IRS. Every situation is different, so trust your tax attorney to use the information you’ve shared with them to your benefit.
Don’t Panic Over IRS CP2000 Notices
If this entire process still seems overwhelming, don’t worry, you’re not alone. Contact an experienced tax attorney and get advice for how to proceed. A tax attorney can help determine if you did under-report your income and compile documentation to best support your case.
Help Me with My IRS CP2000 Notice
Do you need help after receiving an IRS CP2000 notice? Speak with a licensed expert for personalized tax advice. Contact Mindy Meigs expert tax attorney for help managing your IRS CP2000 notice.