One of the most common inquiries is the IRS CP2000 Notice. In a typical year, the IRS sends over 3,000,000 – Three Million – CP2000 Notices to small business owners, free lancers, and other taxpayers. This letter is automatically triggered when there is a mismatch in the computer system between what you are reporting on your tax return and what the person paying you has submitted to the IRS. Note the spelling, there is no space, it is not the CP 2000 NOtice.
IRS CP2000 Notice, The Scary Notice that isn’t so Scary
The IRS CP2000 Notice is technically an audit, which makes everyone very nervous. However, it is a very common letter whenever the information on your return doesn’t match the other information. Unfortunately, the IRS assumes that the recipient is is the wrong when sending them out, but if you are correct, the matter can be resolved quickly. Like all IRS Audits, proper IRS Representation can prevent you from making an unforced error that allows the IRS to take advantage of your ignorance in this matter.
Respond to all IRS Notices Promptly and Correctly
Largely all IRS Notices give you 30-days to respond, and you can often request an additional 30-days. However, since the CP2000 is an “underreporter inquiries,” the IRS is suggesting that you owe additional monies. As underpayments result in interest and fines over time, there is no advantage to delays. You can even see on the IRS Web Page on the CP2000 Notice, you should respond as quickly possible, because the sooner you resolve the dispute, the sooner you can resolve your IRS tax obligations.
CP2000 Notices are Often Wrong – review them before paying
The IRS has a shockingly mixed track record at accuracy in the CP2000 process. Despite these common forms being routinely wrong, the web is filled with bad advance, often telling your to disregard or simply pay the “CP 2000” notice – note the misspelling. The IRS routinely gets bank account numbers wrong, misses properly filed HSA forms, misses estimated tax payments, or makes incorrect interest calculations. It is almost shocking how many mistakes are made in the computerized IRS, but the prevalence of incorrect CP2000 notices requires you to pay careful attention and not assume that the IRS is correct.
What should you do?
If you get an IRS CP2000 Notice, don’t panic, but follow these simple steps.
- Gather the documents that the IRS is references
- Verify if the IRS is right or wrong
- If the IRS is wrong, respond quickly disputing things
- Get IRS Representation if you aren’t comfortable with the response
- Request a payment plan if you do owe money and cannot pay now
But the IRS CP2000 notice is manageable, and it need not turn into a full blown IRS Audit that can disrupt your life and business. For our Outsource Accounting Customers we are usually able to handle these with just a power of attorney form. For our Tax Clients with Audit Protection, we handle CP2000 notices as part of the audit protection.
If you have concerned with a CP2000 Notice or other IRS Correspondence, schedule a Zoom call with me to discuss.