IRS Notice CP2000: Return Adjustment for Tax Underpayment or Overpayment

IRS Notice CP2000

In some cases, the data provided to the Internal Revenue Service (IRS) by taxpayers does not match that of the recipient’s tax return. Anyone who owns a company, hires vendors, or generates legal income in the US is going to be taxed on it. This is why banks, employers, and third parties are constantly reporting to the IRS. Now, if a taxpayer files an inaccurate tax return or is dishonest with their reported figures, the IRS will compare the tax return to the information they have and if they identify differences, notify the taxpayer. This notification is called an IRS tax notice CP2000.

What Does an IRS CP2000 Mean?

The IRS has compared the payment information given to them by banks, employers, businesses, and other payers (1099, 1098, etc.), and placed it side-by-side with the tax return, assessing how the income, credits, and deductions pair with their original data. The AUR (automated underreporter function) which is integrated in the IRS’s system, will then automatically generate a CP2000 notice and send it to the taxpayer’s return address—if, of course, the information doesn’t add up. What they are looking for is undeclared income. In most cases, undeclared income is simply a mistake made by the taxpayer on their tax return. In rarer cases, it is a deliberate evasion of income tax. Regardless, when the IRS sends a CP2000 notice, they are effectively saying ‘we see there is a mistake with your income value, here is your chance to fix it.’ irs-notice-cp-2000

Should I Be Worried?

If you happen to be the recipient of a CP2000 notice, then at this point there is no reason to worry. It is simply a document the IRS sends proposing that you revisit your claimed income, payments, credits, or deductions. These changes will either result in more taxes owed or a larger credit. By no means is the CP200 a bill, nor is it a declaration of an audit. Now that you can rest assured this document does not state you are being penalized, you can begin understanding your CP200.

Understanding Your IRS Tax Notice CP2000

The first page of the CP2000 should include three things; a summary of the IRS’s proposed changes, the appropriate phone number, and a list of steps you should take to address the notice. Additionally, it will:
  • Present the original amount(s) reported
  • Present the data on the IRS’s side given to them by the payer(s)
  • Present the payer’s ID, name, types of documents used, and the tax ID(s)
  • Present the proposed changes to the tax, credits, or payments as administered by the IRS
  • Propose an increase or a decrease in the amount the recipient is liable for
  • Include an attached response form, voucher, and an envelope

How to Respond to IRS Notice CP2000

The first step when dealing with a CP2000 is always to proof the accuracy of what is being stated. A mistake can be made by either the IRS or the payer which submitted the information. If that is the case, you want to ensure that, before responding, the information presented to you is true.

Gather Information

This falls in line with the aforementioned advice. First, you will want to compile every information statement held together by the umbrella that is your SSN. Essentially, put together your forms you used to file (W2s, 1099s, etc.). Then, evaluate the forms you used and compare them to the CP2000. Does the information match? If the answer is yes, then it is on you to calculate the additional tax owed. This is where you want to avoid mistakes you might regret, seeing as responding to a CP2000 notice with more inaccurate information might raise a serious alarm with the IRS. Lastly, there are instances where you may not agree with what is being proposed. In that case, do note that you withhold the right to contest penalties and appeal, through the IRS, the CP2000 notice.

Send the IRS a Response

If you agree with what is being proposed and you owe money, submit the form to the IRS with either a check or money order attached. If you do not have all funds to do so, you can request an IRS payment plan. This request must occur within your response. If you only half-agree with what is being proposed, then you must compile the necessary documents which support your position. This is where we recommend you hire a tax professional, as they will know exactly how to angle the documents to optimize success; success here being that the IRS agrees with your response. If accepted, there is nothing left to do. The IRS will correct the return on their end. If the IRS happens to reject your response, you can either agree to their terms and rectify the situation by submitting payment, or you can choose to appeal the decision. irs-notice-cp-2000

The Processing Time

Regarding the IRS CP2000 notice, typically it can take anywhere from 2-8 weeks for the case to be fully resolved. It is paramount that you do not simply mail the response and leave it to the IRS but instead reach out and ensure that your notice has indeed been addressed. If you allow the notice to sit without action, it can become a bill and that bill can accrue penalties and interest.


The IRS takes underreported income seriously. In cases where the tax return was flagged yet is synonymous to previous filings, the IRS may investigate and find that the taxpayer owes more on previous returns as well. This is where seeking professional tax help can be rewarding, being that an expert can help manage the immediate problem, then ensure that no aftershocks land you in trouble with the IRS or poke holes in your bank account. Finally, it is important that you know a CP200 notice can also be indicative of something good; overpayment. The IRS will also send these proposals to taxpayers that paid too much for income they generated and work to apply the appropriate credit back. Regardless of the situation, act quickly, diligently, and do not allow the notice to go unanswered.