IRS Notice CP2000: what it means and how to respond

What the IRS is really saying"Our numbers don't match yours. Explain?"

What a CP2000 means

The IRS compares your return with the forms others file about you, like W-2s, 1099s and brokerage statements. When something doesn't match, it sends a CP2000 listing the differences and the extra tax, penalty and interest it proposes.

A CP2000 isn't a formal audit, but it works like one. It includes a response form where you can agree, partly agree, or disagree.

Check the IRS's numbers first

CP2000s are often partly or completely wrong. Common reasons:

• Income was reported twice, or reported on a different line of your return.
• The IRS doesn't know what you paid for stock or crypto you sold (your cost basis), so it treats the whole sale as profit.
• The income belongs to someone else, like a spouse on a separate return or a business.
• A 1099 was issued in error, or the amount on it is wrong.

How to respond

1. Don't sign the agreement yet. Compare each item with your records first.
2. If you agree, sign the response form and pay, or set up a payment plan for the new balance.
3. If you disagree with any part, mark that on the form and send a clear explanation with documents, like the corrected 1099 or your cost basis records.
4. Respond by the date on the notice, usually 30 days. If you need more time, ask before the deadline.
5. Don't file an amended return to respond to a CP2000, unless the IRS asks you to. Use the response form.

What happens if you ignore it

The IRS will send a statutory notice of deficiency (often a CP3219A), which gives you 90 days to petition the U.S. Tax Court. After that, the IRS assesses the tax, and the normal collection letters begin.

Common questions

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