You’ll receive a letter from the IRS when the information on your tax return doesn’t match the data reported to the Internal Revenue Service by employers, banks and other third parties. The letter is called an IRS Notice CP2000. It gives detailed information about the issues the IRS has identified and provides steps you should take to resolve them.
You don’t have to panic — a CP2000 isn’t a formal audit notification. It’s just a notice, and your part of the bargain is to agree or disagree with the proposed tax changes. You have 30 days from the date on the notice to respond, although sometimes you can get an extension.
If you ignore it, the follow-up notice is an IRS CP3219A. If you wait to receive that notice, you’ll get detailed information about why the IRS proposes the tax change and how the agency determined the change. This notice also tells you about your right to challenge the decision in U.S. Tax Court. If you decide that seeing the inside of Tax Court is not all it’s cracked up to be, the IRS will work with you during the statutory notice time frame.
Now, if you agree with the changes, sign Form 5564, Notice of Deficiency-Waiver, and mail it to the address shown on the notice. If you disagree, you can file a petition with the Tax Court no later than the date shown on the notice.
And here’s something you should know: The court can’t consider your case if you file the petition late. The IRS suggests you look at other returns you’ve filed to make sure they don’t have the same mistake. Also, it behooves you to correct the copy of the tax return you’ve kept for your records.
You may owe more money to the IRS and may need to think about payment plans and installment agreements if you can’t pay the full amount of taxes you owe.
And here’s another thought: What if you want the IRS to consider additional information? The agency says you should send it along with a written explanation supporting your position. You can also contact whoever reported the information and ask that institution to correct it.
The scary thing you may uncover is identity theft, in which case you send in Form 14039, an Identity Theft Affidavit. You also can go to the Identity Theft Information webpage on the IRS site for more details.
You may be surprised that you received a notice long after a return was filed. Says the IRS: “Our computer systems match the information you report on your tax return with information reported by employers, banks, businesses and others. This matching takes several months to complete.” So if your return is accepted and you get your refund, it doesn’t mean you’re in the clear.
And finally, yes, you will be charged interest on the money you now owe the IRS. It accrues until you pay the amount in full.
If you get a notice, be sure to contact us so we can advise you. Contact an MCB Tax Advisor at 703-218-3600 or click here. To review our tax news articles, click here. To learn more about MCB’s tax practice and our tax experts, click here.