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IRS Notice CP 2000: What It Is and What to Do If You Get One

October 10, 2014  |   Tax Advice   |   Tags: , ,  

Mistakes happen, especially on tax returns. Simply put, the IRS Notice CP 2000 is is the IRS’s way of telling a taxpayer that they think the taxpayer made a mistake when reporting their income. Every year, the IRS receives millions of income tax returns and processes them as quickly as they can. Usually, they are done processing income tax returns before they finish processing the W2s and other forms filed by employers and financial establishments who contributed to taxpayers’ income the previous year. Generally, what is stated on a taxpayer’s income tax return matches what the IRS receives later from employers and financial establishments. However, this is not always the case.

irs noticeWhen the IRS realizes that there is not a match, the ACS (Automated Collection System) sends out a CP 2000 to latest address on file for that taxpayer to open up communication about the discrepancy. It is important for the recipient to read the notice carefully and then examine his or her own copy of that tax return to look for any possible mistakes. That person may even want to compare his or her information with what their employer and financial establishments have on file. Based on their findings, it is important to respond to the CP 2000 by completing its response form and stating whether he or she agrees with what the CP 2000 is reporting. A CP 2000 has a deadline toward the middle top that the response must be sent in by.

If the CP 2000 is correct, the taxpayer will need to pay the underreported amount. The amount should be specified underneath the deadline. However, he or she will not need to amend the income tax return with a 1040x. Instead, the IRS will automatically amend the return. Sometimes, a taxpayer is not able to pay the underreported amount in full. In that case, he or she may want to talk to a reputable tax professional about options to resolve the situation.

If the CP 2000 is incorrect, the taxpayer will need to prove it. This means collecting evidence that the income reported was exactly what the taxpayer received. It is probably a good idea to work with a tax professional to gather paperwork and make a good case to bring to the IRS, in this situation. The IRS will not simply take someone’s word over what they feel is concrete proof that the taxpayer made a mistake on his or her income tax return.

No matter what, it is best for the taxpayer to keep a copy of the CP 2000 on file with the tax return in question. If it turns out that a tax professional is needed to help his or her situation, send that person copies of the tax return in question as well as the CP 2000 right away. This will help speed up the process and get back on the right track with the IRS.