IRS & State Audits
Houston Tax Attorney
No one wants to get a letter from the IRS. Even seeing the envelope is scary enough. The IRS’s Notice CP2000 is even scarier. The IRS issues the Notice CP2000 to alert you to changes it is making to you tax accounts. It almost always means that the IRS is increasing the amount of tax you owe. If you received a CP2000, here is what you need to know.
Why Did the IRS Send You a Notice CP2000?
The short answer is that the IRS thinks you did not correctly report your income tax liability. More specifically, the IRS thinks that you underreported your income.
How Did the IRS Reach this Conclusion?
The IRS has a computer matching system. This system matches tax forms and schedules submitted to the IRS by third parties (such as Forms 1099, Schedules K-1, etc.) to the amounts reported on your income tax return.
This is part of the IRS’s automated underreporter program. The IRS processes these cases as follows:
- The IRS’s computer system matches the third party information return against your income tax return.
- An IRS technician reviews the computer matching and decides the computer matching was correct.
- The IRS technician sends you a Notice CP2000, we are proposing changes to your tax return.
Your tax account is then noted with a collection hold pending receipt of a response to the IRS notice.
What Do I Need to Do If I Receive a CP2000?
You need to act quickly to determine why the Notice CP2000 was issued to you. In some cases the notice will say why it was issued. At a minimum, it may cite the form or schedule that gave rise to the adjustment. You should check to see that you received this third party form and that you reported the income from it on your income tax return.
You should also determine whether the income reported on the third party form is even reportable on your return. There are a number of circumstances where a third party form is issued, but the income does not have to be reported. It is up to you to respond to the IRS and show that the income is not reportable on your income tax return.
Your response should be detailed and well organized. Notice CP2000 cases are worked by lower level employees at the IRS. These employees are more likely to resolve your case in your favor if you make it easy for them to do so.
If you received a Notice CP2000 from the IRS, you need to take it seriously. It can result in a significant tax liability. You need to act to protect your rights. We can help with this. We help taxpayers with these issues daily. ETR |www.wefixirs.com | (877) IRS-ZEROPrevious post: What You need to Know about the IRS Federal Tax Lien When Selling Property | Part 3
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