Let’s face it, most individuals panic when a letter from the IRS arrives in the mail. Take a deep breathe, splash your face with cold water, and be prepared to respond within 30 days.
What is an IRS CP2000 notice? It’s not a formal audit notification or a bill. It’s a letter that proposes an adjustment that may result in additional tax owed. The letter is generated when the information reflected on your income tax return doesn’t match data reported to the IRS. This information includes various forms of income documents from banks, employers, businesses, and other payers, such as Forms W-2, 1098, 1099, etc. The letter provides detailed information on the mismatch of income, how it changes your tax and steps on how to resolve those issues.
The notice generally requires a response within 30 days. Review the information for accuracy and determine if you agree or disagree with the proposed changes.
If you agree, follow the instructions on the notice, complete and sign the response form and mail it in with the envelope provided.
If you disagree with the proposed changes, provide a statement and the support documentation for your position. You may need to contact the businesses or persons that reported the data and ask them to issue corrected statements if the information was inaccurately reported.
An amended return is generally not needed, unless you have additional income, credits or expenses to report. If you choose to file an amended return, complete and submit Form 1040-X, Amended U.S. Individual Income Tax Return. Amended returns can be cumbersome, if you need assistance, please don’t hesitate to give us a call.
If you decide not to respond, the IRS will send another notice. The follow up letter will be a CP3219A, Statutory Notice of Deficiency, which will include information on how to challenge the decision in Tax Court. The IRS will continue to work with you to resolve the issue during the statutory timeframe. My recommendation is not to wait, but to begin resolving the matter by responding to the initial notice.
Going forward, you can avoid future IRS CP2000 notifications by:
- Keeping accurate and detailed records.
- Waiting until you get all of your income statements before filing your tax return.
- Checking the records you get from your employer, mortgage company, bank, or other sources of income (W-2s, 1098s, 1099s, etc.) to make sure they’re correct.
- Including all your income on your tax return. This includes, but is not limited to, income derived from a sharing economy (e.g. Airbnb renting) or second job.
- Following the instructions on how to report income, expenses and deductions.
- Hiring a tax professional to prepare your returns, to mitigate risk and help you find allowable credits and deductions.
- Filing an amended tax return for any information you receive after you’ve filed your return.
If you have received an IRS notice and need assistance responding, don’t hesitate to call us at 708-386-1433 (Oak Park) or 630-577-9074 (Naperville).