IRS Notice CP2000

Internal Revenue Service (“IRS”) Notice CP2000 is a computer-generated notification of additional tax for taxpayers who filed a federal individual income tax return. IRS Notice CP2000 effectively operates as an IRS audit of underreported income and is administered by the IRS AUR program to flag potential underreporters. CP2000 notices are triggered when the IRS receives additional information from third parties reporting taxable income earned under the taxpayer’s social security number (or other tax identification number) that does not match the income information reported on the taxpayer’s tax return or amended tax return. The CP2000 notice also contains a proposed amount due.

The first step a taxpayer should take after receiving a CP2000 letter is to identify the notice response due date. Failure to respond by this date will limit your rights to challenge the proposed assessment. Once the deadline is identified, the taxpayer should carefully review the CP2000 notice to understand the basis for each proposed change identified by the IRS. For example, the CP2000 notice could propose a change to income for an item left off the taxpayer’s return, or the IRS could propose a decrease to an expense item as the third party reported the expense as less than the taxpayer reported it on their return.

Once the taxpayer understands the proposed changes, the taxpayer must determine whether to accept or challenge the proposed changes. The taxpayer should compare their tax documents (such as IRS forms w-2 or 1099) with the proposed changes outlined in the CP2000 notice. If the taxpayer’s documents agree with the proposed IRS changes, then the taxpayer should complete the response section of the notice and return it to the IRS. The taxpayer can then either pay the full amount of tax or request an installment agreement or payment plan.

If the taxpayer’s documents do not agree with the proposed changes outlined in the CP2000 notice, the taxpayer is entitled to challenge the proposed changes. The taxpayer can challenge the proposed changes by submitting a response to the IRS. This response can be mailed to the IRS at the address on the CP2000 notice or transmitted to the fax number listed on the CP2000 notice. The taxpayer’s response should include an explanation of the taxpayer’s position, supporting documentation, and a copy of the CP2000 notice. The supporting documentation can range from forms received from financial institutions showing the correct amount of income received to self-prepared schedules and the underlying documents supporting the numbers on the self-prepared schedule.

The IRS will review the taxpayer’s CP2000 response and, through a separate IRS letter, either reverse or uphold the proposed assessment. If the IRS upholds the proposed assessment, the taxpayer will receive a separate Statutory Notice of Deficiency. This notice allows the taxpayer to further challenge the proposed assessment in U.S. Tax Court by filing a Petition within 90 days of the issue date of the Statutory Notice of Deficiency.

We encourage you to consult with a tax attorney if you received a CP2000 notice and want to challenge it. Our team of tax attorneys has extensive experience challenging CP2000 notices, both administratively and through litigation in U.S. Tax Court, which has saved our clients millions of dollars in proposed tax assessments. We invite you to review some of our CP2000 case results below. 

Results

All cases are different and the summaries below should not be interpreted as a prediction or guarantee of success or specific results.

$1,420,838 CP2000 Assessment Reduced to $0 (Tampa, FL)
Taxpayer received IRS Notice CP2000 proposing additional tax of $1,420,838, based on cryptocurrency trades reported to the IRS on Form 1099-K. Taxpayer challenged the proposed assessment but the IRS upheld it and issued a Statutory Notice of Deficiency. DeWitt Law represented Taxpayer and challenged the assessment in U.S. Tax Court, resulting in the assessment being reversed to $0. 

$460,313 CP2000 Assessment Reduced to $9,527 (Nashville, TN)
Taxpayer received IRS Notice CP2000 proposing additional tax of $460,313, based on income reported to the IRS on Form 1099-S from the sale of several residential properties owned by Taxpayer. DeWitt Law represented Taxpayer and challenged the proposed assessment with the IRS. The IRS never responded and issued a Statutory Notice of Deficiency. After litigation in U.S. Tax Court, the assessment was reduced to $9,527. 

$172,959 CP2000 Assessment Reduced to $0 (Orlando, FL)
Taxpayer received IRS Notice CP2000 proposing additional tax of $172,959, based on income reported to the IRS on Form 1099-S from the sale of Taxpayer's home. DeWitt Law represented Taxpayer and challenged the proposed assessment with the IRS. The IRS never responded and issued a Statutory Notice of Deficiency. After litigating the assessment in U.S. Tax Court, it was reversed to $0. 

$268,699 CP2000 Assessment Reduced to $0 (Nashville, TN)
Taxpayer received IRS Notice CP2000 proposing additional tax of $268,699, based on income reported to the IRS on Form 1099-S from the sale of two residential properties owned by Taxpayer. Taxpayer failed to timely respond to the CP2000 notice, resulting in the issuance of a Statutory Notice of Deficiency. DeWitt Law represented Taxpayer and challenged the assessment in U.S. Tax Court, resulting in the assessment being reversed to $0. 

$299,860 CP2000 Assessment Reversed to $3,864 (Memphis, TN)
Taxpayer received IRS Notice CP2000 proposing additional tax of $299,860, based on income reported to the IRS on Form 1099-S from the sale of Taxpayer's primary home.
DeWitt Law represented Taxpayer and challenged the assessment with the IRS, resulting in the assessment being reduced to $3,864. 

$163,936 CP2000 Assessment Reversed to $0 (Orlando, FL)
Taxpayer received IRS Notice CP2000 proposing additional tax of $163,936, based on income reported to the IRS on Form 1099-S from the sale of Taxpayer's residential property. DeWitt Law represented Taxpayer and challenged the assessment with the IRS, resulting in the assessment being reversed to $0. 

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