Any bookkeeping, business or tax article contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor can it be used to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.

Tax Talk: What is the CP2000 Notice?

March 30, 2022

What is CP2000 notice?

At a glance, the CP2000 Notice is the IRS’ way of informing you that there is something not adding up with your income tax report. This discrepancy doesn’t necessarily mean that you made the mistake. Your receipt of the CP2000 notice might be caused by an error made by an employer, bank, or another source of income. If you receive this notice, it means the amount listed on your tax return is different from what the IRS has on file.

This doesn’t necessarily mean you did anything wrong. It may be that you didn’t receive a 1099-MISC form, which reports income like freelance earnings, or that an employer sent one to the wrong address or had incorrect data on file. Causing the discrepancy between the reported income and the data the IRS has on file.

There are many reasons why data may have been incorrectly reported to the IRS, but whatever the reason for receiving this notice, it’s crucial to ensure that any discrepancies are resolved immediately.

Quick Glance of the CP2000 Notice

The CP2000 Notice is not an audit. However, certain similarities make them work the same way. It is important to respond promptly to the IRS before the deadline indicated in the CP200 notice.
A CP200 Notice is sent to a taxpayer if the IRS notices a discrepancy between the information they have on file and the information they receive from the taxpayer or the taxpayer’s employer, bank, etc.
A taxpayer has the right to contest the penalties and appeal a CP2000 determination if they receive a CP2000 notice. However, it is in the best interest of the taxpayer to consult an Enrolled Agent / Tax Preparer if they plan on contesting the CP2000 notice.

The CP2000 notice will also provide several options for responding to the notice. Some of these options include:

— Agreeing with the proposed changes

— Disagreeing with the proposed changes

— Providing additional information to support your case

There are various reasons why you may receive a CP2000 notice. For example, perhaps you didn’t include all of your income on your tax return or you made an error when calculating the amount of income you earned. Or maybe there was an issue in reporting your Social Security number or name. It could also be that a form was filled out incorrectly by someone else (for example, a Form 1099 issued to you by a bank).

You can have an expert by your side if you plan on contesting and appealing the CP2000 notice. FAS Bookkeeping and Tax Services’ Enrolled Agent can help you deal with the CP2000 notice.

CP2000 response – The correct way!

Consider the circumstances carefully, then respond appropriately.

You will begin by confirming that you owe more taxes. To do so, you’ll need to determine whether you correctly reported the income in question on your tax return. Here’s how:

Make a list of all the information statements you have that have your Social Security number on them. These are forms you get at tax time reporting your income for the year (like W-2s and 1099s). Compare those statements with your tax return to see whether you left any income off your return.
If there were some sources of income that were not included, you’ll need to calculate any additional tax you might owe and make sure you take the associated tax deductions into account.
After all that, you must determine if you agree, partially agree, or disagree with the CP2000 notice you received.

Responding to the CP2000 Notice

If you agree, return the CP2000 response form with your payment – if you do owe them. The IRS will mail you a notice if there is any additional amount due. You can request an installment agreement with your CP2000 response if you do not have enough money to pay the entire amount you owe.
If you agree or disagree with the CP2000 notice, you’ll need to send documents to prove your position. You can attach a corrected return if it helps clarify your position, but don’t file an amended tax return. If the IRS accepts your explanation, it will correct your original return.
If the IRS doesn’t agree with your response, you can consider appealing the decision.

Avoid receiving future CP2000 notices and resulting penalties.

After eight weeks, you can either call the IRS or analyze your transcripts to confirm that it has resolved your issue.
To avoid penalties on returns you filed more recently, look at your information statements to identify any mistakes you made that were corrected in later years. To prepare for your future returns, gather all your tax forms before filing. Tax forms are available from the IRS (called W-2 Wage and Income Transcripts). But beware, W-2 Wage and Income Transcripts don’t contain all your tax forms (called a Form W-2) until later in May.

Need expert help?

FAS Bookkeeping and Tax Services’ Enrolled Agent can help you identify the cause of your CP2000 notice if you are having a hard time identifying it yourself! Get the help of our expert Enrolled Agent!

We are located at 24044 Cinco Village Center Blvd 100, Katy, TX. You can call us at +713 855 8035 or visit our website www.fas-accountingsolutions.com

Get in touch with us today!