A CP2000 Notice is typically generated when the IRS computers determine a mismatch of income or deductions between information you reported on your tax return and information documents it receives from third parties.
The mismatched items can result from:
- Omission of an item of income on your return
- Incorrect information on documents the IRS receives
- Duplication of information sent to the IRS
- Incorrect treatment of an item on your tax return
- Any combination of the above
You may have to pay additional taxes, but sometimes the IRS sends out CP2000 notices that are either partially or totally incorrect.
The first page of the notice provides a “Summary of Proposed Changes”. This shows the proposed tax adjustment including penalties and interest and what steps you should take to fulfill the requirements of the notice. You must respond to the notice within 30 days of the notice date. If you fail to respond within the allotted time the IRS will send a statutory notice of deficiency which allows you to petition the U.S. Tax Court.
Beginning with the second page you’ll find a detailed explanation of the proposed changes and the resulting increase to your income and taxes. For example, let’s assume you received $5,000 of IRA distributions from ABC Bank during the year which you forget to include on your return. The IRS received Form 1099-R from the bank reporting the distribution and the IRS matching program finds the discrepancy. The IRS will send you a CP2000 Notice telling you that you failed to report $5,000 of IRA distributions from ABC Bank and include a calculation of change to your taxable income and the additional tax, interest and penalties you owe.
What to Do If You Get a CP2000 Notice
You several options upon receiving a CP2000 Notice:
- If you agree with the changes you can pay in full, or if you can’t pay immediately, you can arrangements to pay over time.
- If you disagree, you can complete the response form included with the Notice and provide any documentation to support your claim.
- Do nothing and wait for the Statutory Notice of Deficiency
If you disagree with the Notice and do nothing, you will lose your right to go to the IRS Office of Appeals to resolve the dispute.
In our past experience, proposed adjustments to tax returns from Notice CP2000 are often erroneous. Call us today at 866-550-7655 to discuss how you should respond to your CP2000 notice or other tax problem. Our Boca Raton tax consultants are ready to provide you with the tax relief you need.