Got an IRS CP2000 Notice? Do These 5 Things First

A CP2000 lands in your mailbox proposing extra tax because IRS computer-matching found income on a 1099 or W-2 that does not appear on your return. It is the most common IRS letter SMBs receive - and the easiest to mishandle. Here is the response sequence we use in our IRS representation practice.

1. Do not pay it on day one

Roughly half of CP2000 proposals are wrong or partially wrong. Paying immediately waives your ability to dispute. Read the notice end-to-end first.

2. Pull the underlying return and source documents

Get the year's tax return, all 1099s/W-2s, brokerage 1099-B with cost-basis detail, and any K-1s. Match each item on the notice to your return. Common false hits: cost basis missing on stock sales (the IRS assumes zero basis), 1099-K duplicating sales already on Schedule C, gross instead of net proceeds.

3. Decide: agree, partially agree, or disagree

• Agree: sign the response form, pay or set up an installment agreement.
• Partially agree: send a written explanation with the corrected calculation and supporting documents.
• Disagree: send a full written response with documentation. Do NOT file an amended return unless the CP2000 instructs you to.

4. Respond within 30 days

The deadline on the notice matters. Missing it triggers a Statutory Notice of Deficiency (90 days) and then assessment. Mail the response certified, return-receipt. Fax is also accepted at the number on the notice.

5. If the amount is over $5,000, get a CPA

The 20% accuracy-related penalty alone can dwarf the tax. A CPA with a Form 2848 power of attorney can call the IRS directly, escalate to the AUR unit, and stop collection actions while you respond. See our IRS representation service or book a same-week call.