IRS CP2000
Notice of Proposed Changes to Your Tax Return — Underreporter
The IRS says income on your return doesn't match what was reported to them by payers.
Deadline
60 days from notice date to respond
If you do not respond within 60 days, the IRS will assess the proposed additional tax, penalties, and interest automatically.
Respond promptly to protect your options and avoid escalation.
What IRS CP2000 Means
CP2000 is an underreporter notice — it means the IRS's records show income that was reported to them by a bank, employer, broker, or other payer (via 1099s, W-2s, or other information returns) that does not appear on your tax return as filed.
This is not an audit. CP2000 is a proposed adjustment — the IRS is proposing to add the missing income and calculate additional tax, penalties, and interest. You have the right to agree, partially agree, or disagree with the proposed changes.
Common causes include unreported 1099-NEC income (freelance work), 1099-B brokerage transactions, 1099-R retirement distributions, cancellation of debt income (1099-C), or Social Security income not properly reported. Sometimes the discrepancy is due to an error in basis reporting by the broker, which means you do not actually owe the full proposed amount.
What the IRS Can Do If You Don't Respond
- Automatically assess the proposed additional tax after 60 days with no response
- Add a 20% accuracy-related penalty to the proposed assessment
- Charge interest from the original due date of the return
- Issue a Notice of Deficiency (Letter 531 / 90-Day Letter) if no agreement is reached
- Send the account to collections if the assessed balance is not paid
What You Should Do Right Now
- 1
Compare the IRS's proposed changes against your actual tax records carefully
- 2
If you agree fully, sign the response form and pay or set up a payment plan
- 3
If you have documentation that refutes the proposed changes, respond with that documentation
- 4
If a broker reported wrong cost basis and you actually have a lower gain (or a loss), correct it with your actual records
- 5
Do not ignore — a non-response is treated as full agreement and the assessment is automatic
- 6
Consult a tax professional before responding — CP2000 responses require precision
Resolution Options Available to You
Disagree with the proposed changes and request an appeal
Professional representation in responding to underreporter notices
Request removal of accuracy-related penalties if you have reasonable cause
If you agree and owe, set up a payment plan
Frequently Asked Questions About IRS CP2000
Is CP2000 an audit?
No. CP2000 is an automated matching notice — the IRS's computers compared information returns to your 1040 and found a discrepancy. It is a proposed assessment, not a formal audit. However, if you don't respond correctly, it can become a formal deficiency.
What if I actually reported the income but the IRS didn't see it?
This happens. If you reported income in a different place on the return (e.g., Schedule C instead of Schedule B), you can respond with documentation showing the income was in fact reported. The IRS will adjust the proposed assessment.
Can I negotiate the CP2000 amount?
You can dispute the proposed amount with documentation. If the amount is correct but you can't pay it, you can set up a payment plan or explore an Offer in Compromise. You cannot simply negotiate the tax down without a legal or factual basis.
What is the 60-day deadline?
The IRS gives you 60 days to respond to CP2000. If you don't respond, the proposed tax, penalties, and interest are automatically assessed and you receive a Notice of Deficiency (Letter 531).
Professional References
IRC: IRC §6213 — Deficiency Procedures; IRC §6662 — Accuracy-Related Penalty
IRM: IRM 4.19.2 — Underreporter Program
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