What a CP2000 means
The IRS compares your return with the forms others file about you, such as W-2s, 1099s and 1098s. When they don't line up, the CP2000 lays out the differences, the changes the IRS is proposing, and the tax, penalty and interest that would result. It's often called an underreporter notice.
It isn't a formal audit, and the IRS isn't saying you owe yet. It's asking you to agree or explain.
Common reasons
- A 1099 left off the return, such as freelance, gig or interest income.
- Stock or crypto sales where the IRS has the sale proceeds but not your cost basis, so it treats the whole amount as gain.
- Retirement account distributions or rollovers reported incorrectly.
- Unemployment, gambling or other income on a form you didn't receive or forgot about.
- A form filed with the wrong amount or under the wrong Social Security number.
The proposed amount is often wrong in your favor. Missing cost basis on investment sales is a classic example: once you document what you paid, the proposed tax can drop sharply or disappear.
What happens if you don't respond
The IRS generally sends a statutory notice of deficiency, giving you 90 days (150 if addressed to you outside the U.S.) to petition the U.S. Tax Court. If you don't, the tax is assessed and you start receiving balance-due notices, beginning with a CP14.
Penalties you may see
A CP2000 can include an accuracy-related penalty, typically 20% of the underpayment, when the change is large enough. Reasonable cause can be raised in your response.
Your options
Agree with the changes
If the IRS's numbers are right, you sign the response form and pay, or request a payment plan if you can't pay the full amount now.
Partially agree or disagree
You explain which items are wrong and back that up with documents, such as brokerage statements showing your cost basis or corrected forms. The IRS then reviews it and can reduce or drop the proposed tax.
Ask for more time
If you need longer to gather records, an extension can be requested before the response date passes.
Request penalty relief
If an accuracy-related penalty is proposed, reasonable cause can be raised as part of the response. See all resolution options.
Work with a tax resolution firm like ours
Many CP2000s are simple enough to answer on your own. A firm helps when the amount is large, the records are messy, or the IRS is missing information it needs, such as your cost basis on investment sales.
What we handle for you:
- Review each proposed change against your records
- Reconstruct missing cost basis and gather supporting documents
- Prepare and send your response, and request penalty relief where it applies
Your consultation is free, your fee is quoted in writing before any work starts, and if you don't need us, we'll tell you.
Questions about the CP2000
Is a CP2000 an audit?
Not a formal one. It's an automated mismatch notice that proposes changes based on third-party information. You can agree, partially agree, or disagree and send documentation.
How long do I have to respond to a CP2000?
Respond by the date on the notice, usually 30 days from the notice date, or 60 days if you live outside the U.S. You can call the number on the notice to request more time.
Should I file an amended return to fix a CP2000?
Usually not. Respond with the response form and documentation unless the notice tells you otherwise.
What if I don't respond to a CP2000?
The IRS generally sends a statutory notice of deficiency, which gives you 90 days to petition the U.S. Tax Court. If you don't act, the proposed tax is assessed and collection notices follow.
Can I dispute only part of a CP2000?
Yes. You can partially agree, explaining which items you dispute and including documents that support your position.