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IRS Notice CP2000 and How to Respond to It

by Agro Accounting CPA Accounting for Artists, Freelancers & Creative Com

The world of accounting can be very complex and, often, basic mistakes in accounting turn into big mistakes. IRS Notice CP2000 is the result of one such mistake. This IRS notice is not the announcement of an audit, but works in the same way. The moment an automated system of the IRS sees some discrepancy on your tax return, it sends a notice to the taxpayer seeking an explanation.

What is the IRS Notice CP2000?

When the information provided by a taxpayer on a tax return does not match the information the IRS has for him/her, a taxpayer receives the IRS Notice CP2000. It is generally a notice of underreported income and explains the taxes and possible penalties that you might owe for not reporting certain income on your tax return.

                      

Why Does a Taxpayer Receive an IRS Notice CP2000?

This usually happens when a taxpayer does not report income from all his/her sources, as reported on tax forms like Form W-2 or 1099, the latter which the IRS has access to. This results in the automatic issue of a notice to the taxpayer.

The notice does not always result in an increase in taxes. It may decrease or increase the income tax of the taxpayer, or it may not change it at all. The IRS obtains information related to the taxpayer’s income, expenditures, and investments from various sources. When the information the IRS has does not match the reported information on the tax return, you receive a notice.

How to Deal With the IRS Notice CP2000

The IRS Notice CP2000 includes all information related to what caused the discrepancy. This notice offers a taxpayer a range of actions:

      Agree

      Disagree

      Partially agree to the proposed amendments

Based on your position, you have to choose an appropriate response to the IRS Notice CP2000. Many times, there are no changes required. You only have to provide information to the IRS.

Here is how you respond to the IRS Notice CP2000:

1. When you agree

If you agree with the changes proposed by the IRS, you have to follow the instructions to sign the response form. The IRS says that it requires both spouses’ signatures if you filed a married filing jointly tax return.

2. When you disagree

If you disagree with the changes proposed by the IRS, you can complete and return the response form. You need to also provide a signed statement explaining the reason why you disagree and supply any documentation to support your statement.

3. When you partially agree

If the information reported on your tax return is not correct, you can contact your accountant for freelance workers, or the business or person that reported your information to the IRS. You can ask them for a corrected document or for a statement to support why the original document is in error, and send the IRS a copy of it with your response.

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About Agro Accounting CPA Innovator   Accounting for Artists, Freelancers & Creative Com

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Created on Sep 13th 2021 03:47. Viewed 103 times.

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