They say nothing good comes in the mail, which is especially true if you receive a notice from the IRS.
If you receive a CP2000, also known as an underreporter inquiry, from the IRS, it means that the IRS believes you underreported your income for a particular year.
The IRS will traditionally send out a series of threats about some possible severe consequences, such as property seizures and tax liens. However, you should not be intimidated. There are many ways to resolve the issue.
Quick Facts About CP2000 Notices
Here are some essential details you should familiarize yourself with regarding CP2000 notices:
- They are usually sent out when the income reported on your tax return doesn’t match what the IRS has on record.
- A CP2000 is not an audit. However, these notices can potentially lead to similar consequences, so you should not ignore them.
- Everyone has rights. If you receive a CP2000 notice and believe the information the IRS has is false, you may contest and appeal.
Your Tax Return vs. IRS Records
There are two benchmarks the IRS uses to determine if you are reporting the correct amount of earnings. One is what you report on your tax return and the second is what the IRS has on file from official documents such as a W-2 or 1099 Form.
If the IRS believes you underreported, the CP2000 will likely outline penalties and additional taxes owed on the missing income.
However, just because you receive a CP2000 does not mean that you need to assume it is completely accurate, or that you have no choice but to comply with the IRS. CP2000 notices are computer-generated and far from perfect.
What to Do When You Get a CP2000 Notice
Whatever you do, don’t panic. No one wants to receive a notice from the IRS, but it does happen.
First, evaluate the situation and consider the best response. If you are unsure of how to proceed, it is wise to contact a tax professional and go over your options. Any reputable tax professional should have free initial consultations with no obligation to hire them.
Saving previous tax documents is crucial. It can help you double-check or dispute what the IRS claims. Compare the statements with your tax return to make sure you didn’t make any mistakes.
Finally, it is time to decide if you agree, partially agree, or do not agree at all with what the CP2000 claims.
How to Settle a CP2000 With the IRS
If you do not find an issue with what the IRS claims you owe, there are many ways to pay back the associated fees and missing taxes. You can always enter an installment agreement with the IRS if you believe you can’t pay it all back at once.
If you dispute the IRS findings, it is time to take action. Fighting back against a CP2000 takes time and effort, but it is doable. Taxpayers do receive inaccurate CP2000 notices from time to time and are able to get them corrected.
Defend Your Case
The CP2000 outlines the steps you can take to dispute the accusations, which requires you to put together all the evidence you have disputing the claims along with an official letter.
There are situations where taxpayers put together a valid dispute only to have it rejected by the IRS. If you still believe they are in the wrong, you can appeal the decision.
The Tax Help You Deserve
When you receive a CP2000 notice from the IRS, it is understandable to feel worried—but you don’t need to panic. We have a dedicated team at Levy & Associates that wants to help. We can outline your options for proceeding with the CP2000, gather the necessary documents to dispute your case, and even help you win your appeal.
Contact us today at 800-TAX-LEVY for more information.