How to Handle an IRS CP2000 Notice for Underreported Income
Getting an IRS notice in the mail can be scary and overwhelming, but careful handling can resolve the issue quickly and painlessly.
One of the most common notices issued by the IRS is the CP2000, Request for Verification of Unreported Income, Payments, and/or Credits. This notice is generated automatically by the IRS’s computer system when information reported to them about you on Forms W-2, 1098, 1099, etc. does not match the information on your tax return.
Once you receive a notice, make sure you have a trustworthy CPA in your corner. Not all tax preparers are CPAs, but a CPA will have the knowledge and tools to help you deal with the notice quickly and efficiently.
The CPA will ask to review the notice you received and a copy of your filed tax return. They may also research your online account and/or request your tax transcripts from the IRS to obtain more information.
If you agree with the information shown in the CP2000 notice after careful review of your tax documents and consultation with your CPA, there is often no need to amend your return. Instead, you can simply sign the response portion of the notice and return it to the IRS. Sometimes an amended return is necessary, such as when the notice leads you to uncover additional income, credits, or expenses that should be reported.
If you believe the information reported to the IRS is incorrect, you’ll need to contact the business or person who reported the information and request a corrected document.
Your CPA can help you understand whether amending your tax return is necessary and/or how to indicate to the IRS that you disagree with the notice. When you disagree with the notice, your CPA should also discuss protecting your rights to appeal a decision by the IRS. Without including a formal protest with your response, you may lose your right to appeal an IRS decision if your response is not processed within 30 days of the notice date.
The adage “hurry up and wait” applies well to IRS notices. You should take all notices seriously and respond to them promptly. Unfortunately, once the ball is in the IRS’s court, you’ll need to be patient. The IRS handles hundreds of thousands of notices, and it will take them time to process your response no matter how quickly you respond.
Schreiber Accounting and Advisory can help you deal with your tax controversy issue. The Firm can help you understand your situation and your options, prepare written responses, and see you through the process to resolution. Contact the firm for more information.
Material discussed is for informational purposes only. It is not to be interpreted as investment, tax, or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice.