Optima Tax Relief’s Chief Tax Officer and Lead Tax Attorney, Phil, shares his least favorite IRS notice—and surprisingly, it’s not the final levy notice many taxpayers fear. Instead, it’s the CP2000 notice.
What Is a CP2000 Notice?
A CP2000 notice is sent when the IRS believes you failed to report all of your income on your tax return. This usually happens when the income reported by employers, banks, or other third parties doesn’t match what was reported on your return. It’s important to note that a CP2000 is not an audit or a bill — it’s a proposed adjustment. The IRS is simply flagging a discrepancy and giving you the opportunity to agree, disagree, or provide additional information before any changes are made to your return.
It Can Delay Resolving Your Tax Issues
One reason this notice is so frustrating is that it can create major delays. If you’re already working to resolve tax problems with the IRS, a CP2000 often needs to be addressed first before moving forward with payment plans or other resolution options.
The Penalties Can Add Up Quickly
A CP2000 notice can also become expensive. In addition to additional taxes owed, taxpayers may face an accuracy-related penalty of 20%, along with failure-to-pay penalties and interest that continue to grow over time.
Most CP2000 Notices Are Avoidable
One of the biggest frustrations with a CP2000 notice is that it’s often preventable. Carefully reviewing your tax return and ensuring all income is reported accurately can help you avoid unnecessary audits, penalties, and delays with the IRS.
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