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A CP2000 letter, “Notice of Underreported Income,” is not a formal audit that would require a full tax examination by the IRS. It is, however, an automatically generated letter, which is a notice from the IRS essentially saying, “We don’t think you reported all of your income so we are proposing a change to your return.”
Any kind of notice or communication from the IRS – apart from a refund, that is – might cause you to start worrying. If you receive a CP2000 letter, what are your next steps? It is essential to first answer the question, “What is an IRS CP2000 Letter?” You then need to understand why the letter has been sent to you.
The IRS sends CP2000, Proposed Changes to Your Tax Return, if there is a mismatch between the information reported on your tax return and the payment or income information in their records. Also known as an underreporter inquiry, it generally changes the bottom line of your tax return.
Reasons for the Notice
Receiving a CP2000 is a relatively common occurrence, as it is a computer-generated notice issued when the amounts on your return do not tally with the reports third parties have filed with the IRS. This disparity in amounts could be due to a simple error that can be easily remedied by responding with the correct information. But it can turn into a complicated matter involving penalties if you do not act on it immediately. The CP2000 is just a proposal and not a bill.
Read the information in the CP2000 carefully so you know why you have been issued the notice. Instructions will also be provided on what you must do next. In some cases, a CP2000 Response form may be included with the original letter.
If you receive the response form, you must fill it out and return it, following the directions below:
- If the information in the CP2000 is accurate and you agree with it, simply follow the instructions and return the required signed form in the envelope provided. If you filed taxes with your status as Married Filing Jointly, the form must be signed by both you and your spouse.
- If you do not agree with the information in the CP2000, you can check the instructions provided in the form and act accordingly.
- If the information in the notice is wrong because a third party reported incorrect information, contact the party and have them submit a correction, then submit an explanation with the form.
- When you are the one who reported this information incorrectly, you may be able to contact the IRS by phone to correct the issue.
If the information is wrong because you have been a victim of identity theft, report the ID theft to the IRS and the Federal Trade Commission (FTC).
Where Do I Send an IRS CP2000 Response?
The actual mailing address you’ll be responding to depends on your location. If you agree with the notice and want to pay off your tax bill, you should be able to use the return envelope enclosed with the original notice. If you don’t agree, you can find the mailing address for the relevant IRS office listed on your copy of the CP2000.
Can I Pay My CP2000 Online?
Yes, you can pay your tax bill online. Any type of tax bill, including those resulting from a CP2000, can be paid via IRS direct pay. It’s also possible to pay off an installment plan using this portal.
Avoiding CP2000 Letters
While you must act according to IRS procedure after being issued a CP2000 letter, there are a few precautions you can take to avoid a repeat of this situation in the future
- Be diligent about keeping meticulous records
- Include all income from all income sources on your tax return
- Have all your income statements ready before filing your tax return
- Verify statements from third parties such as banks, mortgage companies or other financial institutions, employers, and the like, to see if they match your records
- Follow IRS instructions on reporting expenses, income, and deductions
- If there are any changes in your tax information after you have filed your tax return, file an amended return as soon as possible
Will a CP2000 Stop or Delay My Refund?
Unfortunately, there is no definitive answer to this question. However, you will minimize the chances of a delay if you respond to the CP2000 letter and resolve the issue as soon as possible. It is important to note that CP2000 letters are automatically generated. Generally, a CP2000 is issued well after filing season and any refund you requested when you filed your tax return has been issued. Since the notice is a proposed change and not a bill it generally does not affect a future tax return. If you don’t resolve the issue it becomes a bill, so any outstanding unpaid taxes can affect a future refund.
Beware of Scams
Keep an eye out for scams and fake emails claiming to be from the IRS. The IRS usually doesn’t contact taxpayers through email. However, fake CP2000 notices are being mailed to taxpayers. Don’t use the address or call the phone number on a notice if you suspect it is fake, instead call the IRS at 1-800-829-1040 to verify the authenticity of an IRS notice or letter before sending personal information or mailing a check!
About the Author
Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.