Receiving a letter from the IRS can feel overwhelming, especially when it suggests you’ve underreported your income.
One of the most common notices taxpayers receive is the CP2000 notice, and while it isn’t a formal audit, it shouldn’t be ignored. If you’ve received one, here’s what it actually means, and what you should do next to protect yourself.
What Is a CP2000 Notice?
A CP2000 notice is not an audit, it’s a proposed adjustment to your tax return.
The IRS sends it when the income or payment information they have from third parties (like employers, banks, or investment firms) doesn’t match what you reported on your return.
This notice is generated automatically through the IRS’s Automated Underreporter (AUR) Program, which compares data from W-2s, 1099s, and other information returns against what you filed.
Why Did You Get It?
If you’ve received a CP2000 notice, the IRS likely believes:
- You forgot to report income (like freelance work or stock sales)
- You underreported income (reported less than what payers submitted)
- There’s a mismatch in numbers (like reporting gross instead of net)
- A dependent or jointly filed item doesn’t line up with IRS records
Common triggers include:
- 1099-NEC or 1099-K income from freelance platforms
- Sale of stock or crypto assets
- Distributions from retirement accounts
- Bank account interest or dividends
- Unreported side income
- Overstated deductions based on W-2 income
What the CP2000 Notice Includes
Your CP2000 letter will usually contain:
- A summary of the IRS’s proposed changes
- A comparison between what you reported and what third parties reported
- A calculation of the additional tax, interest, and potential penalties
- Instructions on how to respond
Importantly, this notice does not mean you’re being penalized or investigated yet. It’s simply a proposed adjustment. You have a right to accept, dispute, or partially agree with the findings.
How Much Time Do You Have to Respond?
You generally have 30 days from the date of the letter to respond. Ignoring the notice will result in the IRS assuming you agree with the proposed changes, and they will assess the tax and begin collection.
Responding quickly can help prevent:
- Additional penalties
- Enforcement actions
- A full-blown audit
- Levy or lien procedures
What to Do If You Agree
If the IRS is right and you accidentally underreported, you can:
- Check the math. Mistakes still happen on their end as well.
- Sign the response form agreeing to the proposed change.
- Pay any amount due by the deadline or set up a payment plan.
Make sure to keep a copy for your records.
What to Do If You Disagree with a CP2000 Notice
If you believe the IRS’s proposed changes are incorrect, it’s important to act promptly. Gather all relevant documentation that supports your position, such as account statements, receipts, or other records. Submit this information to the IRS by the deadline provided in your notice.
The IRS will review your response, and in many cases, you can expect a decision within 30 to 90 days. If the IRS accepts your explanation, the matter will be closed. If they do not agree, you may have the option to appeal their determination or engage a qualified tax professional to represent you and protect your interests.
What If You Already Paid That Income Tax?
This happens more than people realize. Sometimes third-party payers (like contract platforms or brokerages) report your gross earnings, and you’ve already accounted for expenses or returns on your original return. If you can prove you already paid, or that the amount reported was incorrect, you won’t owe the full proposed change, or anything at all.
What Happens If You Ignore It?
Ignoring a CP2000 notice is a big mistake. If you fail to respond:
- The IRS will assess the additional tax
- Interest will continue to accrue
- Penalties may be added
- The balance may be sent to collections
- You may face enforced actions like liens or levies
In some cases, repeated CP2000 issues can increase your audit risk in future years.
When to Call a Tax Professional
A CP2000 notice doesn’t always require legal representation, but if any of the following apply, it’s wise to seek help:
- The income discrepancy is significant
- You’re missing documentation
- You’re being assessed large penalties or interest
- You disagree with the notice but don’t know how to respond
- You want to explore Offer in Compromise, payment plans, or appeals
At Anderson Bradshaw Tax Consulting, we’ve helped thousands of clients respond to IRS notices, including CP2000, with clear, strategic communication that protects their finances and peace of mind.
Address Your CP2000 Notice with Confidence
The CP2000 notice is the IRS’s way of flagging a discrepancy in your return, and while it’s common, it should never be taken lightly. Even a small oversight can result in additional taxes, penalties, and interest if not addressed correctly. Responding on your own can feel overwhelming, especially when you’re unsure what documentation to provide or how to dispute the IRS’s findings.
At Anderson Bradshaw Tax Consulting, we help taxpayers turn confusion into clarity. Our experienced tax professionals understands the IRS’s processes and timelines and can guide you through each step; whether that means verifying the IRS’s calculations, correcting simple errors, or building a strong case for appeal. With a prompt and professional response, many CP2000 issues can be resolved quickly and favorably, often without the need for further IRS action.
Don’t leave your tax matter to chance. The sooner you act, the more options you have to protect your finances and minimize risk. Contact Anderson Bradshaw Tax Consulting today for a confidential consultation and let our experienced team ensure your voice is heard and your rights are protected.
Call us at 877.550.3911 or visit www.AndersonBradshawTax.com to learn more.
