Published on: August 6, 2020 Last modified: September 13, 2021

Everything You Need to Know About CP2000 Notices

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    When submitting your tax return, the ideal outcome is that your return will be processed, and you will either pay your taxes or receive a refund for the amount you overpaid. However, even with the best laid plans, mistakes and oversights do occur. When the IRS receives a tax return that has different information from that reported by other entities such as your employer, bank, or loan holders, you may receive an IRS Notice CP2000.

    irs red flag

    What Is a CP2000 Notice?

    The CP2000 Notice is a document the IRS sends to let you know they found discrepancies in your tax return. The notice gives you a chance to correct and clarify the information. It will outline the specific issues with your return and provide the next steps to take for your tax return to be amended or the issue resolved quickly. It can be unsettling to receive any IRS notification but try not to worry when you receive a CP2000 Notice. This isn’t an audit; it’s simply a request for clarification.

    looking at how bonuses are taxed

    What Triggers a CP2000 Notice?

    There are some common situations that trigger the IRS to issue a CP2000 Notice. Here are a few basics to keep in mind about the process:

    Taxpayers who receive these notices generally don’t end up owing anything extra or paying a penalty. It will all depend on your situation and what the IRS is claiming. It’s important to follow all necessary instructions and review your records carefully.Taxpayers who receive these notices generally don’t end up owing anything extra or paying a penalty. It will all depend on your situation and what the IRS is claiming. It’s important to follow all necessary instructions and review your records carefully.

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    What Should I Do If I Receive a CP2000 Notice?

    In the CP2000 Notice, the IRS will usually suggest changes that can affect your refund or taxes owed. If you disagree with these changes or any of the other information provided, you have 30 days from the date of the letter to respond. Read the letter thoroughly, so you don’t miss any of the details or instructions. It is a good idea to contact the IRS at the phone number provided in order to get a clear understanding of the discrepancies and proposed changes. 

    1. Read the Letter Thoroughly

    You don’t want to miss any details or instructions. It’s also wise to contact the IRS at the phone number provided to get a clear understanding of the discrepancies and proposed changes. You may want to contact a tax attorney with questions and to receive additional clarification and guidance. Here is a general overview of what to do in each scenario.

    2. Sign If You Agree With the Notice

    Once you have a full understanding, you can decide whether you agree or disagree with the issues outlined in the CP2000. If you agree, simply sign the enclosed response form and return it to the IRS in the provided envelope within 30 days.

    3. Respond If You Disagree With the Notice

    You still need to fill out the response form and return it to the IRS within 30 days. Be sure to thoroughly read and follow all instructions on the response form, which will detail your next steps, whether you agree or disagree. Sometimes a response form may not be provided, and other details will vary based on the situation.

    4. Contact the 3rd Party

    You may also need to contact the third party that reported the differing information and request an updated statement. For example, a bank that made an error would need to issue the corrected information so the IRS can resolve the issue.

    5. Report Identity Theft

    There is a lot of identity theft surrounding the tax system. You may receive an IRS CP2000 Notice that reflects inaccurate information about you if someone filed a fraudulent tax return using your Social Security number. Immediately send a completed copy of Form 14039, Identity Theft Affidavit to the IRS if you suspect this is the case. Visit the IRS’s Identity Theft Central page for further instructions, including other ways to report tax crimes.

    Keep in mind that if your response does not provide the IRS with sufficient information to resolve the issue, you may receive an IRS Notice CP3219A, Statutory Notice of Deficiency. With a CP3219A, the IRS provides additional information about the tax change and offers you the option to challenge the decision in tax court. If you choose to go this route, contact a tax attorney right away.

    6. If You Aren’t Sure, Get Help

    Contact a qualified tax attorney to help you understand the CP2000 and draft a response. An experienced attorney will help you navigate these often-complex tax processes, so everything gets resolved quickly.
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    Potential Outcomes of Resolving CP2000 Notices

    What will happen once you take the next steps? The process will be much simpler if you:

    You can also include a request for an installment agreement or extension when you reply, options that are discussed more below.

    The other possible outcome to resolve the CP2000 Notice is the IRS making your requested changes to your tax return. The IRS may accept your explanation and correct the records if you disagreed with the notice and provided details that proved your position. Just remember not to file an amended tax return because the IRS will make any corrections.

    You can always appeal the decision if you disagreed and the IRS rejects your explanation. Work with a tax attorney to learn more about all the potential outcomes of resolving a CP2000 Notice.

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    Additional Considerations about Notice CP2000

    Keep these considerations in mind when dealing with an IRS Notice CP2000 as they may affect you in other ways.

    Check Your Other Tax Returns

    Review previous tax returns that include the same information or involve the same third party to ensure the same error was not made. The problem could still be there, even if the IRS didn’t catch it in a previous tax return.

    Ask for an Extension

    Be sure to contact the IRS to request additional time if you are unable to respond within the required 30-day period. Tax Extensions for S Corps are also available for businesses that qualify.

    Maintain Complete Files

    Always keep a copy of your CP2000 Notice and all correspondence on file. The IRS can still lose or misplace documents, even with updated systems in place. Make sure you can always provide reliable documentation if the IRS is unable to locate your paperwork. Be sure to keep a copy of the corrected tax return on file and request a formal transcript of the corrected return once your situation has been resolved.

    If You've Sold Your Home in the Last 12 Months

    Failing to report income earned from the sale of your home or other property can prompt a CP2000 Notice. The IRS still requires you to report this type of income on your tax return. This is one of the most common reasons for CP2000 Notices.

    Submitting Power of Attorney

    Be sure to submit Form 2848 the Power of Attorney Form or fill out section 3 of the response form to authorize your attorney or other involved parties to contact the IRS on your behalf.

    Requesting a Payment Plan

    Contact the IRS to request a payment plan or installment agreement if you are unable to make the required payment. These allow you to pay the owed amount in a series of monthly payments. Your tax attorney can also help you request an Offer in Compromise if you cannot pay the total amount. A qualified tax professional can walk you through any questions or concerns you have throughout this process.
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    FAQs About CP2000 Notices

    CP2000 Notices can be hard to understand on your own, so here are the frequently asked questions that may help you sort through your situation.

    Is a CP2000 Notice a Bill?

    No. These notices are not bills. They only outline the differences in the information the IRS received from another party versus what they received on your tax return. The CP2000 Notice allows recipients to agree, partially agree, or disagree; no additional tax has been charged yet.

    Can I Call the IRS About This Notice?

    Yes. Each CP2000 Notice should include a phone number where a representative can be reached to explain the notice and answer questions.

    Should I File an Amended Tax Return When I Receive a CP2000 Notice?

    No. Do not file an amended tax return for the tax year in question. After the IRS receives a response from you, they will make the corrections. If you do notice the same error in a different tax year, you can file an amended return for that year to avoid additional penalties.

    Will I Have to Pay Interest?

    Possibly. Any additional tax you owe will accrue interest if it isn’t paid by the tax deadline for the applicable year. The IRS may be able to reduce or eliminate interest on tax increases if they made an error or caused a delay, however.
    Other questions may come up over time, so be sure to ask a qualified tax professional for assistance with answering them. He or she will help make certain you understand the process and are doing everything on your end to keep it running smoothly.
    avoid future problems

    How to Avoid Future Problems with IRS CP2000 Notices

    There are a few ways you can stay ahead of the game and avoid receiving another CP2000 in the future. Take note of these strategies to prevent unwanted tax complications.

    Maintain Complete Records

    Keeping financial records is important to have all the documentation you need to file your tax return. Doing so also ensures that this information will be readily available should the IRS request clarification in the future.

    Obtain All Documentation

    Be sure you’ve received and reviewed all of your income statements for accuracy before you file your taxes each year. It can be tempting to file early and get it out of the way, but you may overlook information that could prompt the IRS to send another CP2000 Notice. Be sure to file an amended tax return if you realize an error or receive additional information after you’ve filed your taxes, so all the records are accurate.

    Document All Income

    It can be easy to forget income from unusual sources, such as:
    If you received income like this, you are required to report that income to the IRS in your tax return. Check with your tax attorney if you have questions about reporting your income.

    Follow Return Instructions

    Tax returns can be complicated and require a great deal of attention to detail when reporting income, deductions, credits, and expenses. Even one typo can result in an erroneous tax return and subsequent CP2000 Notice, which could result in paying additional taxes, penalties, and interest. Always reread form instructions and double-check your entries before you submit your taxes.

    Use Online Filing Services

    Many online filing services will help you through the tax preparation and filing process. Online prompts make sure you report all of your deductions, income, and expenses. These filing services also do all the math for you, helping you ensure accuracy and precision.
    irs notice of deficiency

    What to Know About Fraudulent CP2000 Notices

    Tax scammers have been known to send out fraudulent CP2000 Notices in attempts to obtain personal information and money from taxpayers. These fake notices will have an illegitimate address for the IRS; this is a huge red flag. They may also ask you to write a check to the IRS for payment. Please note: Any legitimate payments to the IRS will be made to the United States Treasury.

    These fraudulent documents will often ask you to send payment immediately, without giving you the option to dispute the claims. The IRS will always allow you to dispute claims and pay only when the matter has been resolved.

    You can call the IRS or visit the Understanding Your IRS Notice or Letter page to determine whether your notice is legitimate or not. Simply enter your form number to pull up the record. You can also contact a tax attorney for professional assistance in these matters.

    how to prepare your home office for the IRS

    Get Help With Your CP2000 Notice

    When you receive a CP2000 Notice from the IRS, contact a tax attorney for assistance. Silver Tax Group is dedicated to helping our clients navigate even the most complex tax questions, investigations, tax returns, and legal proceedings. Our experienced team has the knowledge and experience necessary to guide you in the right direction and get the matter resolved quickly. To learn more about ways that we can help with your CP2000 Notice, contact us today!

    Did You Recently Receive a CP2000 Notice?

    We’ll discuss your current financial situation and put a plan together to resolve any potential issues and get you in good standing with the IRS.

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