Taxpayer’s Guide to IRS Notice CP2000

What to Expect if You Receive a Notice About Underreported Income

The IRS sends out Notice CP2000 to taxpayers who have underreported their incomes. This notice makes changes to your tax return, and if you don’t respond, you will incur a tax bill. Wondering what to expect? Not sure why you got this notice?

Then, keep reading for an overview. To get help now, contact us at The Timothy S. Hart Law Group, P.C., today. Or check out our notices page to learn about other IRS letters.

What Does Notice CP2000 Mean?

This notice means that the IRS has increased the income reported on your tax return. As a result, you now owe an additional tax liability. However, the changes aren’t final right away. If you disagree, you can appeal.

Why Did You Receive Notice CP2000?

You receive CP2000 when the IRS finds income from other sources not reported on your tax return. For instance, the IRS may have made changes to your account after receiving documents such as W2, 1099-MISC, 1099-B, 1099-INT, 1099-K, 1099-R, 1099-NEC, or others.

The IRS runs the documents it receives through an automated computer matching program. Then, if it finds discrepancies, it adjusts your tax return and sends you a notice. For example, imagine that your brokerage company sends the IRS a 1099-B about capital gains you earned while selling stocks. You didn’t report the gains on your tax return, and when the IRS’s computers notice that, they send you a CP2000.

There are many different reasons that you may have received this notice, including the following:

• You forgot to put income on your tax return.
• Your accountant forgot to put income on your tax return.
• You lost an income form, and thus the numbers never made it to your tax return.
• You didn’t receive the tax forms from the payer, but the IRS did.
• The payer sent you the tax forms after you filed, and you haven’t had a chance to amend your return.

In some cases, you may receive this notice due to an error. If so, you need to contact the IRS as soon as possible to make changes to your account.

What to Do If You Receive Notice CP2000

Read the notice carefully and make sure that it is correct. If it’s correct, pay the tax in full, or contact the IRS to make payment arrangements. If the notice is incorrect, contact the IRS to fix the error. You should also do the following:

• Update your copy of your tax return.
• Order a transcript of your return if you want an updated copy from the IRS.
• Go through your old tax returns and make sure you didn’t make this mistake in previous years. If so, you may need to amend.
• Make plans to pay the tax liability.

What If You Can’t Afford the Tax Bill?

If you agree with the balance due shown on CP2000 but you can’t afford to pay in full, you should request penalty abatement, and then you should explore the following options:

• Installment agreement
• Partial payment installment agreement
• Offer in compromise
• Currently not collectible status

When you contact a tax pro, they’ll let you know about the best options for your situation.

What If the CP2000 Is Incorrect?

If you don’t agree to the changes to your income, you need to contact the IRS as soon as possible. Call the IRS or send a letter explaining why the changes are incorrect. Send copies of documents backing up your claim.

For instance, if the IRS says that it received a W2 from your employer that shows $100,000 in income but you have a W2 that shows only $65,000 in income, you will need to show the IRS your W2.

In situations where the IRS has incorrect payment forms, the agency urges you to call the payer. To give you an example, say that you correctly reported your freelance income, but one of your clients sent an inflated 1099-NEC to the IRS. In this case, you should reach out to the client to fix the form.

If you don’t contact the IRS by the date on the notice, the changes will become permanent, and the tax will be assessed against you. At that point, it becomes much harder to appeal the change (but it is still possible).

What If the CP2000 Is All My Spouse’s Income?

When you file a joint tax return, both you and your spouse are jointly and severally liable for the tax due. That means that you are responsible for the tax bill whether it was related to your spouse’s income or yours. It also means that the IRS can hold you responsible even if your spouse dies or flees the country, leaving you with the bill.

However, in some cases, you can get around this rule through the IRS’s innocent spouse relief program. If you can prove that you didn’t know about the income and had no reason to know about it, you may be able to get relief from your spouse’s portion of the bill.

What If Identity Theft Occured on My Account

You may receive an incorrect CP2000 if you have been the victim of identity theft. If so, file Form 1409 (Identity Theft Affidavit). Then, work with the IRS or a tax attorney to resolve the issue. This can happen in a few different ways. Take a look.

Here’s one scenario: Scammers often file fake returns that report low-income amounts, and then they direct tax refunds to their own bank accounts. If the IRS receives a fraudulent return in your name and then receives an additional income document that wasn’t on the return, it may adjust your return and send you the CP2000. If you didn’t file the return, this may be the first you’ve heard about the issue.

Here’s another scenario: Say that someone stole your Social Security Number. They worked under your details, and their employer generated a W2 or 1099-NEC with your name and tax ID number. You filed a complete and accurate tax return, but when the IRS received the other income documents, it adjusted your return and sent you a CP2000.

What Happens If You Ignore CP2000?

If you ignore this notice, the IRS will finalize the changes to your tax return, and then the agency will send you a Notice of Deficiency or IRS Notice CP3219A. Once that happens, the agency will start the collection process. This may involve liens, levies, wage garnishments, or other issues.

Get Help With Notice CP2000

To get help with this notice, contact us at the Timothy S. Hart, Law Group, P.C., today. We can help you make arrangements for your tax debt if you agree with the notice. If the notice is incorrect, we can help you fix the issue.

Dealing with the IRS can be very stressful, but you don’t have to face this on your own. We can help you. To learn more, contact us for a free consultation today.