Received A CP2000 Notice From the IRS? What It Means & How To Respond

What is a CP2000 Notice from the IRS?

One of the best things you can do during tax season is to keep good records of all your sources of income. Why? You never know when the IRS might find an error.

The IRS sends out CP2000 Notices every year that identify discrepancies in reported income. Often this is because someone forgets to report a stream of income that the IRS wants to assess.

With more and more people earning income outside of a traditional W-2 job, there’s a chance you could forget to report income and get a CP2000 Notice as a result. This article will walk you through what a CP2000 Notice is, how to respond, and some best practices you can follow to avoid getting one in the first place.

A CP2000 Notice is a computer-generated letter notifying you there is a discrepancy between the income you reported and the information the IRS has on file for you.

Self-employed individuals -– including gig workers -– who accidentally forget to report income might receive a CP2000 Notice.

Keeping detailed records of your income can make it easier to respond to a CP2000 Notice if you get one

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What Is a CP2000 Notice From the IRS?

A CP2000 Notice is a letter indicating a discrepancy between the information in the tax return the IRS has on file for you and the information provided by an employer or other entity you might have earned income from.

You might receive a CP2000 Notice if you forget to report a source of income, an employer incorrectly reports your wages, or it could be a simple administrative error on the IRS’s end.

Sometimes individuals accidentally forget to report income. Gig workers, for example, aren’t classified as W-2 employees. As a result, taxes aren’t withheld from their gross pay. According to the IRS, gig workers, freelancers, and other self-employed individuals are responsible for paying these taxes.

Self-employed individuals must pay an additional 15.3% (this is often called the self-employment tax) which goes to Social Security and Medicare. When you work a traditional W-2 job, your employer typically pays this tax on your behalf. However, when you work for yourself, you’re on the hook to cover this tax.

The notice doesn’t necessarily mean you or your employer did anything wrong; it just means the IRS is trying to figure out why the information it has doesn’t match the information you reported on your taxes.

How Many People Get a CP2000 Notice?

A CP2000 Notice is fairly common. Millions of individuals receive CP2000 Notices every year. While it's one of the most common notices sent out by the IRS, it's usually issued for minor issues like underreported income or a computer error.

Will a CP2000 Notice Stop My Refund?

It could, but it likely won’t. A CP2000 Notice flags discrepancies after your taxes have already been filed. It can take a while for the IRS’s systems to notice the mismatch and issue you a notice.

There’s a good chance that getting a CP2000 Notice won’t halt your refund. Instead, you might be asked to pay back the IRS whatever it decides you owe.

Will a CP2000 Notice Trigger an Audit?

A CP2000 could trigger an audit, but it probably won’t. Instead, once you receive your letter, you’ll be asked to agree or disagree with the IRS.

You might be slightly more likely to experience an audit though if the CP2000 Notice was generated due to underreported self-employment income.

A CP2000 Notice might make the IRS curious about how a tax filer prepared their overall tax return. If someone forgets to report their income, the IRS might examine whether they were also too aggressive in their deductions. This could prompt the IRS to dive deeper, resulting in an audit.

If you're self-employed or earn income from a small business, it's always a good idea to document your earnings and expenses. This way, if you receive a CP2000 Notice and the IRS initiates an audit, you have adequate documentation to support your reported income.

How Do I Respond to a CP2000 Notice?

As shown in the steps below, responding to a CP2000 Notice is pretty straightforward. The one thing to keep in mind is that you should do so promptly. Not responding in the timeframe provided by the IRS could result in being assessed a penalty or extra fees.

Step #1: Read the Notice and Review Your Data

Before you respond to the notice, read it in full and review your data. A CP2000 Notice is issued by a computer system that is far from perfect. While you might have accidentally underreported your income, there’s also a chance the IRS’s file on you is incorrect too.

Find the tax return in question and review your records. Compare it with the information provided in the CP2000 Notice. Look at any W-2s, 1098s, and 1099s that you might have reported for that year. Once you determine whether or not the CP2000 Notice is correct, you can submit your response to the IRS.

Step #2: Respond to the IRS

You have two options on how you can respond to a CP2000 Notice. If it is correct and you excluded a source of income, sign the response letter provided by the IRS and return it to them. Once the IRS receives your agreement, they will send you a tax bill.

If you find the CP2000 Notice is incorrect, you can disagree with it. To do so, you will need to provide a signed statement identifying why you disagree, and you will need to provide documentation backing up your claim. This notice can be mailed to the address printed on the original CP2000 Notice letter.

When you submit your statement, attach it to a copy of the CP2000 Notice response form with the corrected tax form, your original tax form, and any additional documents that might help your case. Make a note in your statement that you would like an appeal if the IRS still insists that you owe more than you reported.

The IRS can be slow and because there are penalties involved, ensure you keep copies of all documents for yourself. If you disagree, consider sending your response via certified mail. This will give you documentation that you sent your response promptly in case any of your materials get lost en route to the IRS.

Step #3: Follow-up

After you submit your response, be sure to follow up with the IRS. You'll either need a tax bill to pay what you owe or a resolution if you contest their findings. Even though the IRS initiated a review process by sending you a CP2000 Notice in the first place, it's still your responsibility to ensure everything is handled promptly to avoid penalties.

Can I Dispute a CP2000?

Yes, as previously mentioned, you can dispute a CP2000 Notice by asking the IRS for an appeal. If you do so promptly, the IRS can issue an appeal hearing to review your case. If disagreement persists, the case is moved to the IRS Office of Appeals for additional consideration.

If you don’t respond quickly, the IRS can proceed with issuing a Notice of Deficiency. This would kick your case up to the U.S. Tax Court and could become a bigger headache than you might want to deal with.

The Takeaway: Don't Fret if You Received a CP2000 Notice

While receiving any letter from the IRS can raise your blood pressure, a CP2000 Notice isn’t necessarily one that you should stress over.

Seeking professional help when handling back taxes can help you avoid the discussed errors. At Advance Tax Relief, we offer specialized tax resolution services to help you deal with IRS debt.

Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today (713)300-3965 for back tax filing and tax relief services.

Advance Tax Relief is rated one of the best tax relief companies nationwide.

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WHEN THE IRS REVOKES YOUR PASSPORT BECAUSE OF BACK TAX DEBT

Having tax debt can have harsh consequences. This makes it important for you to understand the consequences and how to resolve these issues.

One major consequence is passport restrictions.

If you have what the IRS classifies as seriously delinquent tax debt, the government can stop you from getting, renewing, or using your passport.

Since 2018, the IRS has been able to flag (or certify) anyone with seriously delinquent tax debt to the U.S. State Department. This certification allows the State Department to deny a passport application, or revoke a current passport.

What qualifies as seriously delinquent tax debt?

The IRS defines seriously delinquent tax debt as “unpaid, legally enforceable federal tax debt totaling more than $55,000 that remains after the IRS has pursued all collection options such as levies to try to collect the debt.”

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How do I know if I have seriously delinquent tax debt?

You’ll get a CP508C Notice from the IRS. It’s important that you open the letter right away. It will tell you why you received the letter and what steps you can take to resolve your debt. It is extremely important that you address the situation quickly.

Remember, scammers often try to disguise themselves as the IRS. If you get anything other than a letter (like a phone call, email, or social media post), it may be fraud, and you should take a closer look.

If you get this notice, the State Department will give you 90 days before it places any restrictions on your passport. You should use that time to fix any certification issues, fully pay your tax debt, or set up a payment agreement with the IRS.

The IRS won’t send certain tax debt situations to the State Department, including taxpayers who:

Are in bankruptcy

Are victims of tax-related identity theft, as identified by the IRS

Are in currently not collectible status

Are living in a federally declared disaster area

Have a pending installment agreement request with the IRS

Are serving in a designated combat zone, or participating in a contingency operation

For other reasons you may be disqualified, the IRS provides a more in-depth list.

What to do if your passport has been denied or revoked because of seriously delinquent tax debt

You can fix the issue by paying all your tax debt, setting up an IRS payment plan, or getting an offer in compromise or other options.

The IRS will reverse your certification if:

You pay your tax debt.

Your tax debt is legally unenforceable.

Your tax debt is not seriously delinquent.

The certification is incorrect.

Keep in mind that paying your tax bill to less than $55,000 doesn’t automatically reverse your certification. You also have to set up an agreement with the IRS to get back in good standing. This means initiating a payment plan or other qualifying agreement.

What if the certification was made in error?

If you think the IRS certified you by accident or that your tax bill is wrong, call the number in the top right of your notice. If you have already paid your taxes, send proof of the payment to the address on your notice.

How will I know if the IRS reversed my certification?

You’ll get a CP508R Notice, which means the State Department knows about the reversal and you don’t need to respond.

However, it’s important that you keep this notice in your records, continue to pay on time, and meet all the requirements of any installment agreements or other option that you agreed to.

How long will it take to get my passport after the IRS reversed my certification?

As soon as you resolve your tax issue with the IRS, the IRS will reverse your certification and notify the State Department within 30 days. The IRS has special rules if you need to resolve a passport issue in less than 30 days.

Seeking professional help when handling back taxes can help you avoid the discussed errors. At Advance Tax Relief, we offer specialized tax resolution services to help you deal with IRS debt.

Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today (713)300-3965 for back tax filing and tax relief services.

Advance Tax Relief is rated one of the best tax relief companies nationwide.

#TaxPreparation

#TaxLevy

#BackTaxes

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#WageGarnishment 

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#TaxDebtRelief

HOW TO GET YOUR IRS TAX LEVY RELEASED

The IRS has many options to collect tax debts. Some of its more infamous tools include federal tax liens, wage garnishment, refund offsets, and levies.

What is a tax levy?

A levy is a legal seizure of your property to pay a tax debt. When the IRS issues a levy, it can seize your wages, funds in your bank account, Social Security benefits, retirement income, and personal property like cars, boats, and real estate.

Levies are one of the last steps the IRS will take to collect tax debt. It won’t be a surprise, either. The IRS will send you multiple notices trying to collect your tax debt before issuing levies

How long does it take for the IRS to issue a tax levy?

Generally, the IRS will issue a levy only after these three things happen:

The IRS charged you, or assessed, the tax and sent you a tax bill (Notice and Demand for Payment).

You didn’t answer or refused to pay the tax.

The IRS sent you a levy notice (Final Notice of Intent to Levy and Notice of Your Right to a Hearing) at least 30 days before the levy. The IRS may give this notice in person, leave it at your home or business, or send it to your last-known address by certified or registered mail, return receipt requested. The IRS can still levy you even if you didn’t get the notices because you moved and didn’t notify the IRS.

If the IRS levies your state tax refund, you may get a Notice of Levy on a State Tax Refund after the IRS has taken your refund to pay your back taxes. In addition to property you own, the IRS also has access to property you partially own with others, including business income, bank accounts, rental income, and much more.

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What does it take for an IRS tax levy to be released?

The quickest and most effective way to get an IRS levy released (for good) is to pay all the taxes you owe. However, most people dealing with an IRS levy can’t pay. You can get the levy released without paying the taxes you owe.  However, you will need to get into an agreement with the IRS to release the levy. If you break this agreement, you will again be subject to an IRS levy. 

There are a few other ways the IRS will release a levy:

The collection statute expiration date passed before the IRS issued the levy.

Releasing the levy will help you pay the taxes.

The levy creates an economic hardship, meaning the IRS decides the levy is preventing you from meeting basic, reasonable living expenses.

4 ways to stop an IRS tax levy

The IRS has 10 years to collect tax debt. Unless the IRS suspends the debt, extends the debt, or accepts a payment plan, the IRS can’t collect the taxes after that date. If you’re within the collection period and can’t pay your tax debt, you have some options to help manage the debt and maybe remove the levy. These include the following:

Request a payment plan: A payment plan (also called an installment agreement) is an agreement to pay your tax debt back over a specific time. The IRS offers short-term and long-term payment plans, ranging from 180 days or less, up to the number of months left on the statute to collect. Your situation (how much you owe, how fast you can pay it, etc) will determine the plan that’s best for you and whether you qualify. Once the IRS approves your payment plan, you can ask the IRS to immediately release the levy.

Prove that the levy is causing economic hardship: If the levy creates severe economic hardship for a household. The IRS is required to leave you with enough money to cover immediate household expenses.

Request hardship status: This status is called currently not collectible (CNC). It means you can’t pay based on your current income and necessary and allowable personal living expenses. It doesn’t mean that your tax debt goes away. 

Offer in compromise (OIC): An OIC allows you to settle your tax debt for less than you owe. The IRS will look at your income, expenses, equity in assets, and ability to pay to decide whether to accept your offer. Normally, when you request an OIC, the IRS will remove the levy. Just in case, contact IRS Collection to let them know you filed for an OIC and ask them to remove the levy. Learn more about the OIC process.

Seeking professional help when handling back taxes can help you avoid the discussed errors. At Advance Tax Relief, we offer specialized tax resolution services to help you deal with IRS debt.

Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today (713)300-3965 for back tax filing and tax relief services.

Advance Tax Relief is rated one of the best tax relief companies nationwide.

#TaxPreparation

#TaxLevy

#BackTaxes

#TaxReliefHelp

#WageGarnishment 

#OfferInCompromise

#TaxDebtRelief

HOW TO RESOLVE AN IRS ENFORCEMENT ACTION IF YOU HAVE TAX DEBT

Here are the steps to follow when a taxpayer gets an IRS notice or has an IRS enforcement issue.

#1:  Understand the notice and determine if action is needed.  If you are confused by the notice, skip to step #3 and #4.   Some notices are informational in nature (i.e. confirming a payment, requesting added time to process a return, etc.).  Others indicate a tax problem or issue that needs to be resolved.

#2:  If the notice is related to a tax problem(s), noncompliance issue, or IRS enforcement, familiarize yourself with the process and options to resolve the issue.   Review the steps to resolve the major IRS enforcement issues:

• Tax debt and IRS collection solutions  (link to pillar page)

• IRS audits  (link to pillar page)

• CP2000 Underreporter inquiries  (link to pillar page)

• IRS penalties and penalty relief  (link to pillar page)

• Unfiled past-due returns  (link to pillar page)

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#3:  Consider engaging a qualified tax professional.   In many cases you can get better results in less time by engaging a tax pro who is experienced in resolving tax problems.   Tax pros can you better understand the options that are best for your situation.  They also have special hotlines and online tools to better navigate the IRS.  Also, they will know your rights and protect them if the IRS does not follow the rules properly.

#4:  Get all the facts – both from your perspective and the IRS’ perspective.  Good tax problem solving starts with good due diligence.  If the notice and your dispute with the IRS is clear, you need to next get your information from the IRS.  For example, if you are under an office or field audit, it is best to get your wage and income information from the IRS to make sure that you have reported all the income that the IRS has for you.  That is an early step in an audit that you will need to be prepared for to understand the IRS’ questions in the audit.  Another example: if you are seeking penalty abatement, it is best to research your account to understand if you qualify for first-time abatement or if you need to seek reasonable cause.

#5:  Develop a plan to resolve.  You may have multiple problems and urgent enforcement actions or deadlines.   You will need to develop a plan of action – and follow through on each step.  For example, if you have unfiled returns, tax debt, and penalties, you may want your plan to look like this:

• Request collection hold to file returns.

• Change withholding and/or make estimated tax payments to make sure you do not owe on future filed returns.

• Obtain IRS wage and income information and account transcripts to file accurate back returns that pass IRS screening procedures for acceptance.

• File prior year returns and monitor for acceptance.  Request additional collection holds while the IRS processes the returns in order to avoid collection enforcement actions (liens, levies, passport restrictions).

• Get final balance owed and determine correct collection alternative (extension to pay, installment agreement, currently not collectible status, or an offer in compromise)

• Execute the collection option selected and get it accepted by the IRS.

• Determine if you qualify for penalty relief and request appropriate relief.  Be prepared to follow through on appealing any adverse penalty determination.

• Put procedures in place to remain in compliance in the future – hire a tax professional, arrange for installment agreement to be paid by direct debit to avoid missed payments, make adjustments as needed to withholding/estimated tax payments.

• Monitor IRS notices for any changes in compliance status.

#6:  Execute your plan.  Complete the steps – and make any adjustments based on new findings.  Make sure to monitor progress with the IRS and request enforcement relief as needed.

#7:  If needed, appeal any disagreements.  Understand your appeal rights if you have a disagreement with the IRS at any point in the resolution process.   If needed, timely request an appeal.  Be clear in your appeals request with the items of disagreement and the outcome you are requesting.

#8:  Finalize agreements.   Check and make sure that the agreement reached is processed by the IRS.  Also, complete any paperwork needed to finalize the agreement.  For example, if you agreed to an audit adjustment, you need to review the agreed adjustments before signing any agreement with the IRS.

#9:  Stay in compliance to avoid future issues.   Complete the terms of any agreement and monitor future notices for any compliance issues.

Seeking professional help when handling back taxes can help you avoid the discussed errors. At Advance Tax Relief, we offer specialized tax resolution services to help you deal with IRS debt.

Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today (713)300-3965 for back tax filing and tax relief services.

Advance Tax Relief is rated one of the best tax relief companies nationwide.

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#IRS tax relief

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STEPS TO RESOLVE A TAX DEBT ISSUE

Get your IRS account information and collection status from the IRS:   there are 3 items to get from the IRS:  balance owed information, collection enforcement status and deadlines, and compliance status.  It helps to obtain your IRS account transcripts which show the assessments, penalties assessed, balances owed, and some account activity.  

However, it is usually necessary to contact the IRS and get specific information about enforcement activity and deadlines. Also, if you are not sure that you have filed all of your required past year’s tax returns, you will need to ask the IRS.

Evaluate whether you have enough time to avoid collection enforcement:   if enforcement is imminent, it may be best to request an extension if there are other time-consuming steps involved in obtaining a collection agreement (like filing past due returns or evaluating options to pay).   You can contact the IRS directly and request a collection hold or an extension to pay. If the taxpayer is already under a levy or garnishment, they will want to ask for a levy release in exchange for a deadline to comply.  

If enforcement relief is denied, the taxpayer will want to consider appealing the decision or moving quickly to get into an agreement so that the levy is released.

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Fix any immediate noncompliance issues:   taxpayers cannot proceed to obtaining a collection agreement without being both in filing and payment compliance.  Filing compliance means that you have filed all required tax returns (for individuals, that is usually the current and past 6 years of returns).  

For payment compliance, the taxpayer will need to have enough withholding and/or estimated tax payments so that they will not owe again for the next filed tax return.  The taxpayer will need to correct any compliance deficiencies before moving forward to a collection agreement.  

Evaluate the best collection alternative based on your circumstances:   several factors come into consideration including the taxpayer’s ability to pay, the amount owed (which will determine which options may not be available), and avoidance of collection enforcement.  Taxpayers will need to evaluate their financial information in relation to the alternatives available.

Select your collection alternative – and complete the steps to obtaining the agreement:  simple agreements like the extension to pay, SLIA, and 84-month plan can be executed quickly with very few IRS forms to complete.  In many circumstances, the extension to pay and SLIA can be done online in less than 30 minutes. Ability to pay alternatives such as the ability to pay installment agreement, currently not collectible, and the offer in compromise require financial disclosure to the IRS.   

The taxpayer will need to prepare Collection Information Statements (Form 433 series) and other required documents to request these solutions. Likely, there will be multiple interactions with the IRS to answer questions and negotiate the final terms. Taxpayers will need to respond timely in this step to avoid enforced collection (I.e. a levy).

Finalize terms of the agreement and appeal any disagreements:  the taxpayer will need to confirm (by IRS notice or by reviewing their IRS account transcripts) that the agreement was reached.  If there are disagreements with the terms of the agreement, collection enforcement actions, or rejected OIC, the taxpayer may need to appeal to get a second review of their circumstances and proposed solution terms.

Complete the terms of the agreement:  if the agreement is an extension to pay- pay before the due date or get into another collection alternative.  If the agreement is a payment plan, make the payments each month. If the agreement is an OIC, complete the terms of payment and stay in compliance for the next five years.  CNC status requires no further activity. If you had a levy in place, make sure the levy was released if that was in the terms of the agreement.

Stay in compliance and monitor future notices for action:  be sure not to file/owe/not pay in future years.  Any new unpaid balance will default an existing installment agreement.  Unpaid balances in the next five years will also default any approved OIC.  Taxpayers who owe will always get an annual notice from the IRS outlining payments made and the outstanding balance owed.  Any other notices will need to be addressed immediately to avoid default and possible enforced collection activity.

Seeking professional help when handling back taxes can help you avoid the discussed errors. At Advance Tax Relief, we offer specialized tax resolution services to help you deal with IRS debt.

Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today (713)300-3965 for back tax filing and tax relief services.

Advance Tax Relief is rated one of the best tax relief companies nationwide.

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