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.

Your deadline

generally 30 days (60 if outside the U.S.)

Follow the response date printed on your notice. If no agreement is reached, the IRS may issue a statutory notice of deficiency.

How soon to act: High priority

What this notice 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.

How it works

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

Other options

If a broker reported wrong cost basis and you actually have a lower gain (or a loss), correct it with your actual records
Do not ignore — a non-response is treated as full agreement and the assessment is automatic
Consult a tax professional before responding — CP2000 responses require precision

If you do nothing

Issue a statutory notice of deficiency if you do not respond or no agreement is reached
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

Which sounds like you?

IRS Appeals & CDP Hearings

Disagree with the proposed changes and request an appeal

Audit Defense

Professional representation in responding to underreporter notices

Penalty Abatement

Request removal of accuracy-related penalties if you have reasonable cause

Installment Agreement

If you agree and owe, set up a payment plan

Common questions

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 CP2000 response deadline?

The response window is generally 30 days (60 if outside the U.S.). Use the date and instructions printed on your notice.