IRS CP2000 notice: a step-by-step response guide

What it is

The IRS matched income reported to it — W-2s, 1099s, brokerage statements, crypto exchanges — against your return and found a difference. The notice proposes additional tax, penalties and interest. Nothing is final yet.

Read the deadline first

You have 30 days from the notice date to respond. Missing it turns the proposal into an assessment. If you need more time, request it in writing before the date.

Check whether the IRS is right

Often it is partly right. A 1099 was missed. But frequently the income was reported on a different line, the brokerage proceeds ignore cost basis, or the same income appears twice. Compare each line of the notice to your records before agreeing to anything.

The response

Do not file an amended return. Respond on the notice's response form: agree, partially agree or disagree, with an explanation and documents for each item you dispute. Cost-basis statements, a corrected 1099, a schedule showing where the income was reported. Send it by a method with proof of delivery.

Penalties

The accuracy-related penalty is 20% of the understatement. It is frequently waived when the omission was a good-faith mistake and you respond promptly. Ask for it in the response.

When to get help

If the proposed tax is large, the income is from crypto or securities with basis questions, or you have more than one year with the same issue, have a representative handle it under a power of attorney. The response is a written argument; it should read like one.

This article is general information, not advice for your situation. Facts and thresholds change; confirm before acting.