CP2000 IRS Notices
CP 2000 is one of the most common notices issued by IRS. In short, this notice tells the taxpayer that the income reported on his or her tax return does not match what was otherwise reported to IRS on W-2s, 1099s and K-1s. So, what should you do if you receive a CP 2000?
FIRST, read the entire notice to make sure you understand what income the IRS is claiming you did not report.
SECOND, determine whether or not you did, in fact, receive the income and whether or not you reported it on your income tax return for the year referenced in the top right corner of page one of the notice.
THREE If you agree and the amount is nominal, you may simply pay the balance due and send a copy of the notice to your CPA to include in your file. However, if you do not agree or the amount due is large or includes substantial penalties and interest, contact your CPA for advice immediately. The correct response to the notice is critical to correcting errors in IRS’s records and minimizing interest and penalties on any tax balances you actually owe.
You may wonder whether we frequently find that there are errors in IRS records. The answer is: YES. In recent months, we have discovered 1099s that were improperly issued to some clients. These errors included incorrect amounts, incorrect income types and incorrect social security numbers (ID theft!). Other common issues include:
income being incorrectly reported by a taxpayer who self-prepared or used an unqualified preparer,
incorrect determinations of taxable amounts from retirement account withdrawals,
stock basis not being reported to IRS,
amended K-1s or 1099s being issued after the recipient has filed his or her income tax return.
In some cases, a bit of research reveals the amount of additional tax and related interest and penalties proposed on CP 2000 is completely erroneous. This is why it is so important to contact your CPA to ask for help as soon as you receive the notice.
For more information on CP 2000, please visit the IRS link below:
https://www.irs.gov/individuals/understanding-your-cp2000-notice
For help responding to CP 2000 or any other IRS notice, please schedule an appointment via our website:
https://texasaccountingfirmschedule.as.me/schedule.php