10 things to know before you respond to an IRS CP2000 notice

The IRS may automatically mail you a CP2000 notice if the information you reported on your tax return doesn’t match the information the IRS receives from third parties such as your employer or a financial institution.

Receiving a CP2000 notice doesn’t mean the IRS is auditing you. Instead, the notice is proposing that you may not have reported all your income on your tax return, and that you may owe more taxes, penalties, and interest because of the discrepancy.

Learn more about CP2000 notices here.

The IRS notice will include a response form, a payment voucher, and a mailing envelope for your reply. Before you respond, it’s important to review the information on the notice. Here are some things to keep in mind when you respond to the IRS about your CP2000 notice.

1. Review the information in the CP2000 notice for inaccuracies.

The CP2000 notice will include:

• The income you reported on your return
• The forms and amounts that were reported to the IRS under your Taxpayer Identification Number (TIN) by your employers, financial institutions and other third parties
• Changes the IRS is proposing to the income you reported and to your taxes, credits, or payments

2. Respond to the notice.

Send your response to the notice within 30 days of the date on the notice. There are several ways to respond:  by mail, by fax (the fax number is on the CP2000 notice), or by using the IRS Taxpayer Digital Communication link in the notice. Return the response form, along with any other documents you need to include in your response.

Your response will depend on whether you agree or disagree with the changes IRS proposed in the notice.

If you agree with all the changes the IRS proposed in the CP2000 notice:

• Complete the response form and sign and date it. If you filed a joint return, you and your spouse must sign the form. Enclose it in the reply envelope.
• You can also enclose payment for the proposed amounts in the notice. There are advantages to paying quickly.

If you disagree with any of the changes the IRS proposes in the CP2000 notice:

• Mark the box on the response form that indicates you don’t agree with the proposed changes.
• In your reply, enclose the CP2000 response form, a statement that explains why you disagree with the proposed changes, and documents that back up your claim.
• If your response includes a corrected copy of your tax return, clearly write “FOR INFORMATION ONLY” across the top of your CP2000 response.

3. Don’t respond with a Form 1040X (amended tax return).

If you file an amended return, the IRS may not recognize your amended return as a CP2000 response. That’s because amended returns go to a different IRS department that doesn’t handle CP2000 responses. When you file a Form 1040X response, you may not be able to contest any proposed penalties or ask for an appeal. Use the response form and attach explanations (and correct tax computations) instead.

4. Check your IRS wage and income transcripts for errors.

It’s a good idea to request your IRS wage and income transcripts for the tax year the IRS is questioning and in future years to figure out whether you reported everything correctly on your tax return. You may find errors or even tax identity theft that needs to be .

5. Request an appeal in case the IRS disagrees with your response.

The CP2000 notice can also be a 30-day letter, which gives you only 30 days to appeal your CP2000 proposal to the IRS. 

In all your responses to the IRS, make sure to include a request for an appeal with the IRS Independent Office of Appeals. That way, if the IRS takes a while to let you know that it disagrees with your response, you won’t miss the deadline to request an appeal.

If you miss the deadline to appeal, you could get a 90-day letter (CP3219A, Statutory Notice of Deficiency). If you get this notice, it means the IRS has started the next step to assess the tax and you can no longer appeal within the IRS.

6. Contest penalties in your CP2000 response.

In addition to any additional tax you may owe, the IRS often tries to assess penalties. The most likely penalty is the 20% accuracy penalty added to your tax bill. You can contest the penalties in your CP2000 response, even if you agree with the tax the IRS proposed in your CP2000 notice. Be sure that your response explains the facts, law, and arguments for why the IRS shouldn’t charge you the penalties.

7. Fax your response to the IRS when the deadline is in less than 10 days.

If the deadline to respond to the IRS is close, you should fax your response to the IRS, then call the Automated Underreporter Unit in 10 days to make sure the IRS received your response. Alternatively, you can use the link to the Taxpayer Digital Communication response tool on irs.gov to respond to the notice.

8. Call the IRS to request more time to respond or to get a status update.

To get more time to respond to your CP2000 notice or to find out the status of your CP2000 inquiry, call the IRS. The IRS usually allows 30-day extensions to reply to a CP2000 notice if you request the extension before the IRS sends the next notice.

9. Check your current-year tax return to avoid penalties.

It’s common for taxpayers who have reporting mismatches in one year to have them for later years. It’s a good idea to review your most recent return to see whether there are mismatches like the one that appeared on your CP2000 notice. If you find an error, file an amended return to avoid penalties.

10. Request CP2000 reconsideration if the IRS didn’t consider your response.

You’ll know that the IRS didn't consider your CP2000 response if the next letter you get proposes the same amount of tax as the original CP2000 and disregards your response without explanation. If the IRS hasn’t considered your response, look to CP2000 reconsideration as a possible solution to correct the amount the IRS says you owe.

CP2000 notices can be tricky, but you don't have to go it alone. 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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