Receiving a letter from the Internal Revenue Service (IRS) can be intimidating and can lead to many questions. The most common tax notices we receive from clients are regarding tax return information submitted on a return that does not match the IRS records, which is indicated on tax notice number CP2000. There are several reasons this can happen:
Reason #1: The amount due is different on the tax return because the estimated payments do not match the IRS Records.
If so, there are a few steps you need to complete:
1) Review your estimate payment records. If you made all your payments online, you should have a receipt of the payment. Verify that the amount paid and the year paid are for the correct year. A common error we see is when taxpayers include prior year tax payments as estimate payments.
2) If you made any payments via check, verify whether the check was cashed. The IRS is behind on processing mail so perhaps the check has not been cashed. If that is the case, do NOT cancel the check, and wait for the IRS to process the payment. To avoid a check not being processed, we advise that taxpayers make estimate and balance due payments online when applicable.
3) If after review your records match the IRS records, then no other action is required other than to make the required payment.
4) If you verified the payments provided are correct as indicated on the return you filed, you need to respond to the IRS by their deadline. Send the following information:
- Copy of the notice
- Proof of payment: amount, date paid, intended year
Reason #2: The amount of stimulus (EIP) recorded on the return did not match the IRS Records
If you receive a notice that your amount due or amount of refund is different than expected due to the EIP, then verify your bank account to see if 1) you received the EIP and/or 2) the amount of EIP received was not what was recorded on the return. If the IRS is correct, then no action is required. If you believe the IRS is incorrect, you will need to provide the following:
- Copy of the notice
- Bank record showing the amount deposited and or
Reason #3 : Additional income was added to the return because of a missed W2
Some taxpayers will find it unnecessary to include some income because the withholdings might cover the tax owed. However, that is not always the case. By adding additional income, the tax bracket in which the tax is calculated goes up and could be underpaid. The IRS will also assess penalties and interest on the additional amount due generated by the additional income. If you agree that the income in fact is earned, there is no action required, other than making arrangements to pay the balance due.
No matter the type of notice you receive, it is important to NOT ignore the notice. Depending on the type of notice received, there may be a response deadline that, if not met, could have negative impacts on your tax situation. It is also recommended that you send a copy of the notice received to your accountant, as your accountant may need this information to reconcile your tax records.