IRS Notice CP2000In 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.’
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 CP2000The 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