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IRS Notice CP 2000 CPA offers IRS tax audit tips | We Are Proposing Changes to Your Tax Return

IRS Notice CP 2000 CPA. IRS tax audit CPA.

IRS Notice CP 2000 marks the start of a low-level tax audit. Can you handle the response yourself? Sure. But call us for a free consult if or when you’re uncomfortable with the audit process. (910) 399-2705.

IRS Notice CP2000 CPAs expect the first 2012 Notices in November and December of 2013. IRS Notice CP 2000, We Are Proposing Changes to Your Tax Return, is generally routine. Remember IRS Notice CP 2000 is the start of an IRS tax audit. Pleas note you can’t reasonably rely on this post alone for tax audit guidance since your specific fact pattern is unique. I’m an IRS Notice CPA because it’s a source of new clients. Our virtual office means we can handle your IRS Notice CP 2000 regardless of where you live. If you get uncomfortable handling the CP 2000 response, consider calling us for a free consult at (910) 399-2705.

Here are some tips on handling an IRS Notice CP2000

Is IRS Notice CP 2000, We Are Proposing Changes to Your Tax Return, always bad news?

No sometimes it results in a refund. Most “proposed” changes are small enough that it’s easier to pay the IRS than argue with them, even if they’re right. But IRS Notice CP 2000 is the start of an IRS audit, albeit the lowest level of tax audit.

What’s the worst thing I can do in handling Notice CP 2000?

  • Not respond to it. This wastes valuable defense time. The IRS won’t forget you or the additional penalties and interest.
  • Open up other issues on the tax return beyond the main point of Notice CP 2000.
  • Open up other tax returns to an IRS tax audit. Business, personal, payroll etc.
  • Assume the IRS is correct. Note the IRS is usually correct, for the information they have on file.
  • Being rude to IRS personnel.

Can I handle a response to Notice CP 2000 myself?

Here are some things to consider if you need an IRS Notice CPA’s help:

  • Is the amount demanded on Notice CP 2000 large enough to warrant bringing in a CPA?
  • Are there known problems with other personal or business tax returns that warrant hiring a CPA?
  • Do you understand the tax issues involved?
  • Can you follow the IRS calculations? They’re not always right.
  • Is the stress of dealing with an IRS audit worth bringing in a professional?

Can I amend the tax return covered by IRS Notice CP 2000?

Sure. Just make sure it’s worthwhile. Most IRS Notice CP 2000(s) just require a response, not an amended tax return. But here are two real life examples of how amending the tax return really made a difference.

A new client called me on a Notice CP 2000. He hadn’t included a Form 1099-MISC as income on his Form 1040. The additional tax was about $600. Why? The IRS wanted to tax all of it because they had no information about the associated deductions. While perusing his tax returns I noticed he moved in the subsequent year and rented out his old house. He hadn’t claimed moving expenses or rental expenses to get his house ready. So I amended the tax return to include a Schedule C (to report the Form 1099-MISC expenses), Form 3903 (moving expenses) and Schedule E (rental property). Amending turned a $600 demand from the IRS into a refund.

A new client called about an IRS CP 2000 Notice for a prior tax year demanding $200,000+. Ouch. Why? She had a rental property foreclosure and hadn’t received a Form 1099-C, Cancellation of Debt, probably because she moved. Like most folks she had no knowledge of cancelled debt or rental property foreclosure tax consequences. So the IRS wanted to tax her on the total amount of cancelled debt as reported by the bank. Turns out she hadn’t realized the foreclosure was a “sale” of the rental property for IRS purposes either. So I amended the prior tax return to include IRS tax Form 982 (to exclude the cancelled debt from taxable income) and Form 4797 to report the ordinary loss she incurred on the rental property foreclosure. This negated the entire demanded on IRS Notice CP2000 and generated modest IRS and State refunds.

Common simple scenarios that don’t require a CPA

  • The dollar amount is so small that paying the IRS is just quicker and easier. Many new Clients get emotionally embroiled over a wrongful IRS demand.
  • There’s just a math error.
  • You inadvertently didn’t include some tax form, usually income related.

Don’t Forget to ask for penalty abatement

The IRS, and some States, will abate penalties on a “first offense.” But you have to ask for it.

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