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IRS Notice CP 2000 | CPA accountant offers tips on IRS tax audits

CPA Wilmington NC discusses IRS tax audits

Any IRS Notice is disconcerting. Our virtual office allows us to offer service regardless of where you live. If you’d like a free initial consultant with an experienced CPA call (910) 399-2705.

IRS Notice CP 2000 starts a correspondence tax audit . Conducted through the mail, it usually aims at very specific and limited issues. The IRS mails a CP 2000 Notice, usually suggesting changes to your tax return. It explains the issues involved and kindly re-calculates the amount you owe. IRS Notice CP 2000 is computer generated. Why was your return selected for a Correspondence tax audit? Sometimes tax returns are randomly selected. But my experience is that Notice CP 2000 usually has a legitimate tax issue. But as a tax CPA, I’ve also found most CP 2000(s) don’t reflect the entire picture, see the example in the next paragraph.

Should you pay? It depends. If you mistakenly listed your interest income as $972 instead of $1,972, they’ve got you. But you shouldn’t immediately be intimidated into paying the amount on Notice CP 2000 without due diligence either. Let’s say you acquired a rental property and didn’t report the rent on your tax preparation. Oops! On the CP 2000 Notice, the IRS re-calculates your additional tax on the entire rent income.  But, you’ve got the right to deduct associated expenses from the rental income. So, in this case, you will want to amend your prior tax return via Form 1040-X, this time including federal tax form Schedule E.

“IRS Notice CP 2000 correspondence shouldn’t be ignored. Their computer technology is superb and they don’t forget or relent. Your rights as a taxpayer have time limits.”
Gary Bode, IRS Notice CP 2000 CPA accountant

Sometimes, the IRS Notice CP 2000  just requests additional documentation to support a deduction on your Form 1040.  Like, say, proof of your real estate taxes paid on Schedule A (for itemized deductions), or a copy of your business mileage log for Schedule C.  Unfortunately, the taxpayer has the burden of proof in theses cases.  Thus all the caveats about keeping at least three years of documentation on file. Remember your State gets notified of any change to your federal tax form 1040.

Should you get your CPA involved on Notice CP 2000? 

It depends. I think most taxpayers handle IRS Notice CP 2000 themselves. But when new clients call us, they’ve usually done their own prior tax preparation and the IRS has found fault with it. Here’s a few things to consider and/or avoid:

  • Don’t open up other tax issues on the tax return in question.
  • Don’t allow expansion of the tax audit to other tax years.
  • Understand the tax issues involved on Notice CP 2000.
  • How much additional tax is at stake?
  • How vulnerable are you on other areas of the tax return?
  • How stressful is it dealing with the IRS? Any experienced CPA runs interference for you.
  • How dispassionate are you about your taxes? Sometimes it’s hard to see the forest through the trees.

I’m an IRS Notice CP 2000 CPA accountant with a virtual office. Distance isn’t an issue of working with us. If you need a free initial consult, call us at (910) 399-2705. We offer IRS tax audit representation and handle back tax cases.

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