When you get a CP2000 notice in the mail from the IRS, it means that the IRS thinks you left income off your tax return. CP2000 notices feel a lot like an audit. But really, the IRS is just asking you to explain why there’s a mismatch between your return and IRS records.
There are lots of reasons to look closely at notices from the IRS. (See: Incorrect CP2000s Are More Common Than You Think.) With CP2000 notices, it’s also important to make sure you preserve all your rights when you respond to the IRS.
The CP2000 notice comes with a response form so you can easily get back to the IRS. It’s pretty convenient. But the response form has two shortcomings. So before you respond with a checkmark, you must know these important tips.
1. Don’t lose your right to fight an accuracy penalty.
You may agree with the IRS that you made a mistake on your tax return. But do you agree with the penalties that the IRS is proposing?
The IRS automatically charges accuracy or negligence penalties if the IRS thinks you were negligent in underpaying taxes on your return. This penalty is 20% of the tax increase the IRS says you owe in the CP2000 notice.
Maybe you had reasonable cause for the mistake. If you check the box in the CP2000 notice agreeing to all the changes, you are agreeing to all the penalties, too.
2. Don’t lose your right to appeal.
The CP2000 is a complex notice. It can serve double duty as an initial request for information and a 30-day letter. Generally, 30-day letters give you 30 days to request a conference with the IRS Office of Appeals if you don’t agree with the notice.
If the IRS disagrees with your CP2000 response, the IRS usually sends a Statutory Notice of Deficiency (90-day letter). After you get that letter, you can’t request an Appeals conference. You’ll have 90 days to petition the U.S. Tax Court. After the 90-day letter, you’ll get a final bill from the IRS.
What’s so special about a conference with the IRS Office of Appeals?
Nobody wants to take the IRS to court – especially if someone at the IRS can informally take a second look at your dispute. An IRS Appeals officer can check the accuracy of the IRS tax examiner’s determination about your CP2000 – and reverse the examiner’s decision without requiring you to go to court.
In fact, most Tax Court petitions end up back in IRS appeals, so why not request an appeal without having to go through the hassle of a time-consuming Tax Court petition and legal proceedings?
IRS appeals conferences have these benefits:
- First, your request for an appeal should trigger a phone call from the IRS. The IRS may call you to resolve the issues before your case goes to an appeal.
- Second, appeals conferences are usually informal and done over the phone.
- Third, Appeals officers may be more willing to “see the facts and law differently” from the IRS tax examiner who made the first decision on your CP2000 notice.
How to get expert help
You have the right to contest penalties and appeal an IRS decision about your CP2000 notice. But you must ask. Checking the box on the IRS form may not effectively protect your rights. Learn more about how to address a CP2000 notice.
Your H&R Block tax professional can help you respond to your CP2000 notice and communicate with the IRS. Learn more about H&R Block’s Tax Audit & Tax Notice Services. Or make an appointment for a free consultation with a local tax professional by calling 855-536-6504 or finding a local tax pro.