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CP2000 - Notice of Underreporting Income

CP2000 - Notice of Underreporting Income

A letter from the IRS can give most taxpayers concern. A CP2000 notification is a notification from the IRS that the income or payment information does not match the information provided on the taxpayer's return. If the notice is for undeclared or underreported income, it may lead to an increase in taxes.

Contact a tax professional for assistance in responding to a CP2000 notice or any other tax questions.


What is IRS CP2000- Notice of Underreported Income?

An IRS CP2000 notification usually means that the information submitted to the IRS does not match the taxpayer's return. This may be caused by a discrepancy in the amount of reported income, an unreported source of income, or other discrepancies between the taxpayer's return and IRS records.

According to the IRS, CP2000 notification information may include:

  • Amounts reported to the IRS by the payer

  • Payer name, identification number, type of document issued (W-2, 1098, 1099), and TIN (tax identification number)

  • Proposed changes to income, taxes, credits, and/or taxpayer payments

  • Response form, payment receipt, and envelope.

  • The amounts are indicated in the taxpayer's initial or corrective declaration.

The difference could be related to an administrative or accounting error, a loss of the income source, or a taxpayer incorrectly reporting due to error or fraud. For instance, an employer may have made a mistake by entering an employee's social security number (SSN), or someone may be using someone else's SSN. This may result in tax returns for the unaware taxpayer.


Next steps after receiving an IRS CP2000

The notice provides fundamental information for responding to a CP2000. You should ensure to read the notice carefully so as to understand what it says, where your unreported income is coming from, and how unreported income may affect your tax payment.

The Internal Revenue Service notice may have a response section or provide instructions for responding. If the taxpayer accepts the notice, the taxpayer can respond accordingly and sign the notice (with the signatures of both spouses, if married, filing jointly).

The Internal Revenue Service recommends that you respond to the CP2000 notification within 30 days of the notice to accelerate resolution (or 60 days if the taxpayer resides outside the United States). If the Internal Revenue Service (IRS) does not receive a response by the response date, it may send a Statutory Notice of Deficiency.

Undeclared income can have consequences beyond paying additional taxes. Unreported income may result in late fees or change your entire tax return (including refund, payment, and tax rate). Contact your tax expert if you have questions about a CP2000 notification or if you disagree with the notification.


Review your tax return and previous tax documentation

After a CP2000 notification, you can review your previous tax return to identify issues. You may also wish to review records from your employer, financial service providers, mortgage companies, and other sources of income to ensure that your information is accurate and up-to-date.


CP2000 notice and tax increase

The undeclared tax return may result in increased tax. Generally, the tax increase will result in interest being accrued on any outstanding balance until paid in full. If you cannot pay the full amount, contact your tax attorney or try to work out a payment plan with the IRS.

If you agree with the notification, the IRS will make corrections so that you do not have to file an amended return. However, unreported income may affect other changes to your tax return, including credits, deductions, or certain allocations. Talk to a tax lawyer about your options after receiving a CP2000 notification from the IRS.


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