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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...