If you received a CP2000, it means that the IRS thinks the income and/or payment information they have on file doesn’t match the information you reported on your tax return. This could affect your tax return; it may cause an increase or decrease in your tax, or it may not change it at all.
CP2000 notices, aka Automated Under Reporter (“AUR”) notices
The CP2000 is a computuer generated notice, and is quite common. If the information reported to the IRS by 3rd parties doesn't seem to match the amounts on your return, you will receive one of these notices. It is not a bill. The IRS simply says that it is a letter to inform you about information they received that may affect your tax due. Bear in mind that if you don’t respond, you’ll face additional penalties and interest. Then, you'll get a real bill that they will want to collect on.
It's not always bad news! Sometimes, it's a simple error a taxpayer may have made by leaving off information (say, income from a second job they forgot about). And sometimes, the IRS's software (which isn't the most sophisticated) may make an error.
What you should do
- Don't ignore the notice. You only have 30 days from the date of the letter (not the date you receive it) to return your response (this doesn't mean physically putting it in the mail; it means the date it is actually delivered to the IRS).
- Read the notice to see if you agree or disagree with the information the IRS is providing.
- Your CP2000 may come with an IRS response form. If so, the form will explain what actions you should take (whether you agree or disagree, see below). Complete the notice and submit it back to the IRS.
- Sometimes, the IRS does not include this form (thanks for keeping it simple, IRS!). If they do not include a response form, the notice will have alternate instructions on what steps you should take.
- If you feel like the information provided to the IRS by the 3rd party was incorrect, contact them. Ask them to correct it, and then provide the corrected info to the IRS.
If you agree with the adjusted information, you'll sign and return the form acknowledging that you agree to the updated total.
If you disagree with the IRS's findings or want to contest the information, you'll need either to call the IRS using the listed phone number or write to them, providing documentation of your information and why you disagree. Pro tip: be thorough and provide a lot of details and data.
Common questions about your CP2000
The information is wrong because someone else is using my name and social security number. What can I do?
Call the IRS and let them know. Identity theft is becoming more and more common with the IRS.
I reported the information but I reported it incorrectly. Can I call the IRS to correct my return?
The IRS can accept your information over the phone for incorrectly reported information as long as the mistake didn't increase or decrease your tax. Otherwise, it needs to be done in writing.
Do I need to amend my return?
If the information displayed in the CP2000 notice is correct, you don't need to amend your return unless you have additional income, credits or expenses to report. If you agree with the notice, follow the instructions to sign the response page and return it to the IRS.
The notice says my taxes will increase. Will I be charged interest on the money I owe?
Yes, interest accrues on your unpaid balance until you pay it in full.
What happens if I can’t pay the full amount I owe?
There are options! We help clients set up payment plans (Installment Agreements) or one time lump sum payments (an Offer in Compromise). We may also be able to get you into something called "Currently Not Collectible" status, or even look to see if bankruptcy is the best option.
BEWARE – Fake CP2000 Notices
There are scammers everywhere. They have caught on to the CP2000 notice, and have been sending out fake notices to taxpayers. Click here to read about the scam, and how to tell the difference between a fake CP2000, and a real CP2000.
CP2000 for stock or mutual fund sales
Were you issued an IRS CP2000 Letter for stock sales or mutual funds? The IRS has new enhanced stock sales reporting, but this does not help taxpayers who purchased stock prior to 2011. The IRS only mandates that brokerage houses report cost basis on the sale of stock and mutual funds purchased after 2011. While this change helps millions of taxpayers who sold stock that they purchased after 2011 avoid the dreaded CP2000 letter, this does not help people who sold stock purchased before 2011 and have had recent gains. Learn more here.
Tips for avoiding future problems
- Keep accurate and full records – The IRS loves records
- Wait until you get all of your income statements before filing your tax return
- Check 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
- Include all your income on your tax return
- Follow the instructions on how to report income, expenses and deductions
- Filie an amended tax return for any information you receive after you’ve filed your return
If you've received a CP2000 and need assistance, contact us. We can help. Call us at 888-727-8796 or email email@example.com.