Tax Dictionary – Underreported Income

IRS Definition

The IRS compares the payment information reported to the IRS by employers, banks, businesses, and other payers on income documents (Forms W-2, 1098, 1099, etc.) to the income, credits, and deductions you report on your income tax return. The Automated Underreporter (AUR) function uses an automated system for this comparison and sends out a Notice CP2000 if you didn’t report income on your return that was reported to the IRS by a payer or if it appears that payments, credits, and/or deductions are overstated.

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The IRS compares information statements (Forms W-2, Forms 1099, etc.) reported under your Social Security number (SSN) to the information on your tax return. If the IRS’ computer system finds a mismatch, it may mean that you have underreported income. The IRS may send an underreporter notice to request more information from you to resolve the income mismatch.

Sometimes your income and tax liability are correct, but the IRS thinks you didn’t report income simply because the income was reported on the wrong place on your tax return.

Learn how to address an IRS CP2000 notice.

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