How to avoid CP2000 notices & what to do when you get one

The IRS collects many types of documents about your income, expenses and credits to the IRS, including:

• Forms W-2 or 1099 reporting money you’ve earned
• Form 1098 reporting your mortgage interest
• Form 5498 reporting your IRA contributions

If your tax return and the information the IRS has about you don’t match, the IRS may send a CP2000 notice explaining the information it received and proposing more taxes.

What is a CP2000 Notice?

A CP2000 notice is a letter from the IRS that says the information the IRS has on file is different from what you reported on your tax return. This discrepancy may cause an increase or decrease in your tax liability or may not change it at all. The notice explains what information the IRS used to determine the proposed changes to your tax return.

To avoid a CP2000 notice and potential penalties and interest, there are a few important steps to follow.

How to Avoid an IRS Notice CP2000

1. Request your Wage & Income Transcript and match it to your tax return

Your IRS Wage and Income (W&I) transcript lists all the information the IRS has on file for the tax year. Compare it to the information you included on your tax return. You may discover missing income, deductions or credits, and find that you should claim more income or deductions. These discrepancies between your reported income and the IRS’s information on file can result in CP2000 inquiries.

When Can I Request My W&I Transcript?

You may not be able to request your W&I transcript for the prior year until the end of May following Tax Day. If you made IRA contributions, you may want to wait until July so that the W&I transcript includes information from your Form 5498. You can make your request by mail, by calling the IRS or online.

W&I Transcripts When Filing Jointly:

Married taxpayers filing jointly should order W&I transcripts for both taxpayers. Each taxpayer with a TIN has a separate W&I transcript, with Forms W-2, 1099, etc, reported under their TIN.

2. File an amended return, if needed.

If you need to make changes to your filed return after matching it with your W&I transcript, you should file an amended return to report the items you left out. If you find that you owe more taxes, file an amended return right away to correct the issue. That way, you may be able to avoid a CP2000 notice and accuracy penalties and interest.

How to Respond to a CP2000 Notice

If you weren’t able to file an amended return in time, you may have already received a CP2000 notice. It’s also possible the IRS made an error that can be corrected. Getting this notice can be alarming, but there are simple steps you can take to respond to a CP2000 in a timely and accurate manner. When you get a CP2000, you should:

1. Audit your own tax situation.

To begin with, you’ll need to get an accurate picture of what you owe in taxes. Get your important tax documents together, all of which are linked to your TIN. These forms arrive around tax time, and may include:

• Form W-2
• Form 1099
• Form 1098

Check these statements against your tax return to see if you forgot to include some income on your return. If the statements and your return are different, you’ll need to calculate the taxes you owe. You might have additional deductions that factor into the new tax calculation, so pay close attention to all the information on your forms, statements and tax return.

Once you’ve taken a careful look at your tax situation, you can decide whether you agree or disagree with the CP2000 notice.

2. Respond to the IRS.

If you agree with the notice, meaning you made an error on your return, send the CP2000 response form to the IRS with your tax payment. If you can’t make the full payment, you can request in your response to pay in installments.

If you disagree with the information on your CP2000 notice, you’ll need to send the IRS documents that prove your case. Don’t send original documents; send copies. The IRS may ask you for more information. If the IRS accepts your response, it will  accept your return as originally filed. If the IRS rejects your CP2000 response, you can appeal the decision.

3. Be proactive to prevent penalties.

After about 2 months, you can call the IRS to see if the IRS resolved your issue. If you made an error on one tax return, it’s possible you’ve made similar errors on others. Check returns you’ve filed in other years to see if there are recurring inaccuracies. If you find any, file an amended return for each inaccurate filing to avoid more CP2000 notices and penalties and interest.

For future returns, be sure to gather all your important tax statements before filing. The IRS sends your wage and income transcripts by request, but they won’t be available until late May.

We're here for you

Want some guidance navigating your transcripts or looking into an IRS notice? We can help. At Jackson Hewitt, we have 40 years of expertise to help you manage your tax issues. Whether simple or complex, our team of licensed professionals are trained to work directly with the IRS, while keeping you updated every step of the way. Start for free today and learn about how we can help resolve your tax issues.

About the Author

Jim Buttonow, CPA, CITP, is the Senior Vice President for Post-Filing Tax Services at Jackson Hewitt. He’s been a leader in helping taxpayers and tax professionals resolve tax problems with the IRS, where he had worked for 19 years in various compliance-enforcement positions. Prior to his current role, Jim’s consulting practice focused on the areas of tax controversy and tax administration, which included leading product development on tax problem software for tax professionals, testifying before Congress, advocating for IRS transparency and efficiency, and proposing innovative large-scale solutions for taxpayers and tax professionals. Jim is also the author of Tax Problems and Solutions Handbook, a publication aimed at helping tax pros work more effectively in post-filing matters and resolving their clients’ most common tax problems.

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