I got a CP2000 notice from the IRS — what should I do?
A CP2000 notice is not an audit. That distinction matters because it changes how you respond. The IRS is telling you that information reported to them by a third party doesn’t match what you filed on your tax return. A bank, employer, client, or mortgage company sent the IRS a form (a 1099, W-2, or 1098) showing income or payments that either don’t appear on your return or don’t match the amounts you reported. The IRS ran an automated comparison, found a discrepancy, and is proposing an adjustment along with the additional tax they believe you owe.
The most common triggers are unreported 1099 income from freelance or contract work, a missing W-2 from a job you forgot about, or differences in mortgage interest or investment income. Sometimes the IRS is correct and you simply missed something. Sometimes they’re partially right. And sometimes the notice is flat wrong because the income was already reported on a different line of your return or a 1099 was issued in error.
You have 30 days to respond. That deadline is firm and ignoring it is the worst thing you can do. If you don’t respond, the IRS treats the proposed adjustment as accepted. The additional tax, plus penalties and interest, becomes a formal balance due and moves into collection. At that point your options get narrower and more expensive.
Start by reading the notice carefully. The CP2000 will list the specific items in question and identify which third party reported the information. Compare those items against your actual tax return to determine whether there is a real discrepancy or a misunderstanding. If you agree the IRS is correct, sign the response form and either send payment or request a payment plan. If you partially agree or fully disagree, you’ll need to submit a written explanation with supporting documentation.
This is where professional help pays for itself. An Enrolled Agent can pull your IRS wage and income transcripts, compare them line by line against your return, and pinpoint exactly where the mismatch occurred. Our IRS tax representation service handles the entire process, from reviewing the notice to preparing and submitting a formal response on your behalf.
One thing to keep in mind is that the IRS calculates the proposed adjustment using only the information they have. They don’t account for deductions or expenses that would offset the income in question. A 1099 showing $15,000 doesn’t mean you owe tax on the full amount if you had $9,000 in legitimate business expenses against that income. Responding with proper documentation of those offsetting expenses can significantly reduce or eliminate the proposed balance.
If you’ve received a CP2000 and aren’t sure whether the IRS is right or how to respond, working with experienced bookkeepers in Fairfax who understand IRS notices can save you from overpaying or letting the situation escalate. The goal is to respond accurately, on time, and with the documentation needed to support your position.
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