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.
What Is a CP2000 Notice?
The CP2000 Notice is the IRS’s way of notifying you of the discrepancies in your tax return and offering you the means of correcting the information. It will outline the specific issues with your return and give you specific steps to follow in order to resolve the issues and complete your tax return. Although it can be unsettling to receive a notice from the IRS, don’t worry! This isn’t an audit, it is simply the IRS asking for clarification.
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.
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 with the changes, simply sign the enclosed Response Form and return it to the IRS in the provided envelope within 30 days of the date on the CP2000 notice.
If You Disagree With the Notice
If you disagree with the information in the CP2000 Notice, you should fill out the Response Form and return it to the IRS within 30 days of the date printed on the Notice. Be sure to thoroughly read and follow all instructions on the Response Form. In some cases, a Response Form may not have been provided, in which case you should follow the instructions on the CP2000 Notice. If you are not sure how to respond, contact a qualified tax attorney to help you interpret your CP2000 and draft a response. A seasoned tax attorney will help you navigate the complex IRS tax processes, so you can resolve your tax issues quickly with minimal hassle.
Contact the 3rd Party
When drafting your response to the IRS, you can contact the 3rd party who has reported erroneous information and request an updated statement. With this information, the IRS will be better able to address your concerns and resolve the issue.
Keep in mind that if your response does not provide the IRS with sufficient information to resolve the issue, they may issue 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 pursue your dispute in Tax Court, it is important that you contact a tax attorney, if you have not already done so.
Report Identity Theft
If the information on your IRS CP2000 is incorrect because your social security number and name have been stolen, send a completed copy of Form 14039, Identity Theft Affidavit to the IRS. You can find more information on how to handle identity theft and get these crimes reported to the IRS at the IRS’s Identity Theft Central. Alternatively you can call the IRS and report these crimes directly.
Additional Considerations about Notice CP2000
In addition to providing the appropriate response to the IRS, keep the following considerations in mind, as they may affect you in other ways.
Check Your Other Tax Returns
If you have other tax returns that include the same information reported or involve the same third party, double check that they do not contain the same errors. Even if the IRS did not catch it in a previous tax return, the problem could still be present, and it is better to ensure that you have everything corrected.
Ask for an Extension
If you are unable to respond to the IRS within the 30-day period, be sure to contact them to request additional time to resolve the issue. Tax Extensions for S Corps are also available for businesses that qualify.
Maintain Complete Files
Keep a copy of your CP2000 Notice and all correspondence on file. The IRS is a sizable organization, and documents can sometimes get lost or misplaced. Ensure that you can provide reliable documentation to the IRS in case they are unable to locate your paperwork for some reason. Be sure that you also keep a copy of the corrected tax return on file, and request a formal transcript of the corrected return once the 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.
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Request a Payment Plan
If you are unable to make the required payment, be sure to contact the IRS to request a payment plan or installment agreement. Your tax attorney can also help you to request an Offer in Compromise if you are unable to pay the total amount.
How to Avoid Future Problems with IRS CP2000 Notices
Although nothing is certain, there are some ways that you can avoid receiving another CP2000 in the future. Be sure to follow the suggestions below in order to prevent unwanted tax complications.
Maintain Complete Records
Not only does this ensure that you have all the documentation you need to file with your taxes, it will be readily available should the IRS request additional information in the future.
Obtain All Documentation
Before you file your taxes each year, be sure that you have received and reviewed all of your income statements for accuracy. It can be tempting to file early and get it out of the way, but you may overlook mistakes that could prompt the IRS to send another CP2000. If you have already filed your taxes and receive additional information, be sure to file an amended tax return, and save yourself time and effort.
Document All Income
It may seem like a no-brainer, but it can be easy to forget income from unusual sources. If you received any other income such as interest payments, insurance payoffs, or even monetary gifts, you are required to report that income to the IRS in your tax return. Check with your tax attorney to see how to best report your total income for the year.
Follow Return Instructions
Tax returns can be complicated and require a great deal of attention to accuracy when reporting income, deductions, and expenses. Even one typo can result in an erroneous tax return and a dreaded CP2000 Notice which can result in paying additional taxes, penalties and interest. To be safe, re-read the 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 return process. They will provide prompts to ensure that you have reported all of your deductions, income, and expenses. In addition, they will do the math for you and help you to double check your entries for accuracy.
Get Help With Your CP2000 Notice
At Silver Tax Group, we are 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 help you achieve an effective resolution. To learn more about ways that we can help with your CP2000 Notice, contact us today!
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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.