October 28th, 2022 in Tax Law
What you must know when responding to IRS notice CP2000′. When you receive Internal Revenue Service Notice CP2000, you wonder what has gone wrong. Notice CP2000 is not an audit. Notice CP2000 simply lets you know there appears to be a mismatch between the income reported on your return and the income information reported to the IRS.
When you respond to the IRS notice you want to ensure your rights are preserved. Notice CP2000 comes with a response form attached. It is really easy to give away some rights when you respond unless you understand the pitfalls. Before you simply check the box, take the time to read further.
Preserve Your Right to Dispute Your Penalties
Even if you agree you forgot to claim some income, do you agree with the penalties that are being proposed? The IRS almost automatically adds accuracy and negligence penalties to your CP2000 Notice. This is 20% of the tax the IRS’s tax assessment proposing and can be significant. If you believed you made a mistake that qualifies as reasonable cause, you want to be careful how to respond to IRS Notice CP2000. If you check the box indicating you agree to the changes proposed on Notice CP2000, you are agreeing to the penalties as well. If you do not agree you should have penalties assessed against you, don’t check the box indicating you agree with Notice CP2000.
Preserve Your Right to Appeal the Notice
While IRS Notice CP2000 appears simple, it is a complex notice that is filled with land mines for the unwary. Notice CP2000 serves double duty as a request for information and a 30 day notice. Generally a 30 day notice allows you 30 days to request a conference with an IRS Appeals Officer if you do not agree with the notice. For Notice CP2000, if you do not request a conference with an IRS Appeals Officer and the IRS disagrees with your response, you have waived your right to request a conference with an IRS Appeals Officer.
If you do not request a conference with the IRS Appeals Officer, the IRS will issue a Notice of Deficiency if they disagree with your response. After you receive the Notice of Deficiency you cannot request a conference with an Appeals Officer. Your only options are either to accept the IRS proposed assessment or respond to the Notice of Deficiency by filing a petition in the United States Tax Court. If you do not file a petition with the United States Tax Court within 90 days, the tax assessment will be finalized and you will receive a bill from the Internal Revenue Service.
An IRS Appeals Officer, on the other hand, looks at your case with fresh eyes. The IRS Appeals Officer can override the IRS’s initial determination without the time and expense of filing formal litigation against the Internal Revenue Service. When you request an Appeals conference with an IRS Appeals Officer, an IRS Appeals Officer will contact you to schedule a conference. Most conferences will occur over the phone but you can request a face to face meeting.
You have the right to contest the penalties and request an IRS Appeals Conference. You have to ask to preserve your rights. A tax professional can help to ensure your rights are preserved and the matter resolved in the most economical way possible.