What is a CP2000 Letter?
You open the mailbox and your stomach does a flip. There's a letter from the Internal Revenue Service. The IRS gives some guidance on their website - but they aren't advocating for you. What should you do if it says, "CP2000 Letter"?
The most common letter is called a CP2000 letter. This is an "automated underreporter" notice issued to you when information reported to the IRS doesn't match your tax return. For example, you forgot to add income from stock dividends or a 1099.
A CP2000 is the start of a correspondence audit. A correspondence audit is conducted by mail and is the most common type of IRS audit. It is the lowest level of IRS audit and is usually less intrusive than field or office audits. The key to resolution is a timely and complete response to any requests sent by the IRS.
Sometimes, you will agree that the amount due is correct. If that is the case, make the payment as soon as possible. Delay will result in additional interest and penalties being assessed. However, if you don't agree with the notice or need help interpreting what the IRS is looking for, you will want to engage a tax professional to discuss your options. CP2000 letters are computer generated and may have mistakes. You have the right to appeal or disagree with a CP2000 assessment.
What information is needed for CP2000 Letter?
To help your tax professional assess the situation and prepare a response for you, you should gather the following information ahead of your appointment:
- A copy of your IRS notice CP2000.
- Any correspondence on the CP2000 you’ve already sent to the IRS.
- A copy of the tax return the IRS is auditing.
- Copies of your tax returns from the year before and the year after the tax return in question.
- Additional deductions or expenses related to the CP2000 items.
For example: 1098's received from the bank as well as closing documents to substantiate property tax deductions on a home you sold.
- Any other CP2000 notices you’ve received in the past.
The worst thing a taxpayer can do is delay in responding to the IRS. The Service doesn't forget about you and penalties as well as interest continue to accrue every day the tax remains unpaid.
If you received a CP2000 and are not sure what to do, reach out to us and we can help.