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Don’t pay more in taxes than you have to. Take full advantage of all deductions and credits available. Planning is the key to successfully and legally reducing your tax liability. The author, Juanita Farmer, is the Managing Partner of J.D. Farmer & Associates, LLC, a public accounting firm, located in Germantown. Rely... Read more

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What to Do if You Receive an IRS CP2000 Notice

An IRS CP2000 notice is mailed to a taxpayer when income reported from third-party sources such as an employer, bank, or mortgage company does not match the income reported on the tax return.

It is not a tax bill or a formal audit notification; it merely informs you about the information the IRS has received and how it affects your tax. It is, however, important to pay attention to what your CP2000 notice states because interest accrues on your unpaid balance until you pay it in full.

If you receive a CP2000 notice in the mail complete the response form. If your notice doesn’t have a response form, then follow the notice instructions. Generally, you must respond within 30 days of the date printed on the notice. You may request additional time to respond, and if you cannot pay the full amount that you owe, you can set up a payment plan with the IRS.

If the information on the CP2000 notice is not correct, then check the notice response form for instructions on what to do next. You also may want to contact whoever reported the information and ask them to correct it.

If the information is wrong because someone else is using your name and social security number please contact the IRS and let them know. You can also use the link on the IRS Identity theft information web page to find out more about what you can do.

If you do not respond, the IRS will send another notice. If the IRS does not accept the information provided, it will send IRS Notice CP3219A, Statutory Notice of Deficiency, and information about how to challenge the decision in Tax Court.

Do I Need to Amend My Return?

If the information displayed in the CP2000 notice is correct, you don’t need to amend your return unless you have additional income, credits or expenses to report. If you agree with the IRS notice, follow the instructions to sign the response page and return it to the IRS in the envelope provided.

If you have additional income, credits or expenses to report, complete and submit a Form 1040-X, Amended U.S. Individual Income Tax Return.

How to Avoid Receiving an IRS CP2000 notice:

  • Keep accurate and detailed records.
  • Wait until you receive all of your income statements before filing your tax return.
  • Check the records you receive from your employer, mortgage company, bank, or other sources of income (W-2s, 1098s, 1099s, etc.) to make sure they are correct.
  • Include all your income on your tax return including that from a second job or fees derived from the sharing economy (e.g. renting a spare room out on Airbnb).
  • Follow the instructions on how to report income, expenses and deductions.
  • File an amended tax return for any information you receive after you’ve filed your return.
  • Use a professional tax preparer who will help you avoid mistakes and find credits and deductions you may qualify for.

 

 

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Juanita Farmer, CPA

About Juanita Farmer, CPA

Juanita Farmer. CPA is the Managing Partner of J.D. Farmer & Associates, LLC, a Public accounting firm, located in Germantown, Maryland. Ms Farmer has been practicing in the field of accounting and tax for over 27 years.

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