Did you get an IRS CP2000 notice in the mail? Don’t worry! You’re not being audited, or anything of that nature. But you should always respond to IRS notices with promptness. Here’s what a CP2000 notice is and how you can respond to it.
What is an IRS CP2000 Notice?
An IRS CP2000 notice is issued by the IRS when they receive information from third parties that does not match the information you provided on your return. For example, the income you listed on your return might not match the income on your W-2 that was provided to the IRS by your employer.
The IRS issues a CP2000 notice to reflect the changes they propose to make to your return. The notice provides you with a brief summary of the changes, as well as for instructions on what to do if you disagree. One of the most common reasons that taxpayers receive an IRS CP2000 notice is because they omitted income information on their tax return, including omitted side income, rental income, or investment dividends.
Understanding Your IRS CP2000 Notice
The IRS CP2000 is not a bill. In fact, the notice might even show that you’re entitled to a larger refund than you expected. However, the IRS might determine that you still have some owed taxes, and you’ll be given a deadline by which to pay them.
The IRS determines the changes that need to be made to your return by comparing all of the income, payments, credits, and deductions you reported on your tax return with items reported to the IRS by employers, banks, businesses, and other players. The IRS will then make corrections if both sets of data do not match.
The IRS CP2000 will give you an opportunity to examine the changes the IRS is proposing and to either dispute the proposed changes or agree with them.
How to Respond to a CP2000 Notice
Generally, it takes the IRS at least 12 months to review a tax return in conjunction with other information reported on behalf of the Taxpayer. Therefore, the CP2000 notice will usually be for a prior-year tax return.
Once you receive an IRS CP2000 notice, you will need to look at the proposed changes and respond before the due date that’s indicated on the notice. If you do not respond to the notice by the due date, the IRS will assess the balances they proposed and issue a final bill that reflects the changes.
You should always read and review all correspondence you receive from the IRS so that you are able to respond in a timely manner. The key to resolving the issue quickly is reading the notice and making sure a response is tendered by the due date on the notice.
What do I do if I agree with the proposed changes?
If you agree with the proposed changes, you’ll send the IRS CP2000 notice back to the IRS. If you’re required to pay additional taxes, then you’ll return the notice with your payment included.
What do I do if I disagree with the proposed changes?
If you disagree with some or all of the proposed changes, then you’ll need to mail a response to the IRS that proves your position. Compile all of your tax and income-related documents and include them with your response. Attach a corrected return to clarify your position (but don’t actually file an amended return).
If the IRS rejects your response, you can always file an appeal. A professional tax consultant can help you significantly in an appeal process.
What if I can’t pay my tax bill by the due date?
If you agree with your CP2000 notice and you owe additional taxes to the IRS, you may find it difficult to pay your tax obligation by the due date that’s stipulated on the notice. Furthermore, your notice might levy penalty fees that make your bill even higher.
If you can’t pay your tax bill by the due date—or if paying it in full would cause significant financial hardship for you—then you should contact the IRS and request implementing a payment plan. This will allow you to pay your bill over monthly installments rather than all at once.
Can I call the IRS to correct my return?
If you accidentally misreported your tax information, you may be able to call the IRS and make corrections over the phone so long as the correction won’t increase or decrease the tax you owe. If it does, then you’ll need to make your corrections in writing.
Beware of fake notices
There are plenty of scammers that may send you a fraudulent IRS CP2000 notice. Fake notices can look very convincing, but there are a few ways you can spot a fraudulent notice. Quite often, fake notices will request payments to “I.R.S.” rather than the United States Treasury. Fake notices might also include threatening language that promises harsh legal action against you unless you make your payment within a short span of time. This is not how the IRS enforces tax matters.
Also, be aware that scammers may attempt to defraud you by contacting you over the phone or email. Know that the main form of communication by the IRS is by mail, and not by other contact methods.
-Irina Pavchinskaya – Cedano, ESQ
Community Tax can provide tax and IRS help. Contact Community Tax today to learn how you can benefit: (844) 205-8380