Stellar Guide | Your Employee Received a CP2000?

Understanding IRS Notice CP2000

So, an employee or yourself received a CP2000 notice from the IRS, huh? Take a deep breath—it’s not the end of the world. This notice simply means the IRS thinks there’s a mismatch between the income the receiver reported and what their employer, bank, or another institution reported on their end. It’s not a bill, but it’s a heads-up that you might owe more taxes (plus interest and penalties if you don’t take action). Let’s break it down:

What Exactly is a CP2000 Notice?

The IRS sends out a CP2000 when there’s a discrepancy between what the receiver reported on your tax return and what they’ve got from third parties—think W-2s, 1099s, etc. This notice is their polite way of saying, “We think you owe us a bit more money, but we’re open to talking it out.”

Proposed Changes: The notice outlines adjustments the IRS thinks should be made to your tax return.
Response Required: You have the chance to agree or disagree. The ball’s in your court.
Not a Bill: Unlike the scarier Letter 3219, this one’s just a proposal—not a demand for payment (yet).

How the Notice Looks (and What to Look For)

Here’s what to expect when that letter shows up in your mailbox:

Notice Code: CP2000 (that’s how you know it’s the one).
IRS Contact Info: Includes a return address and phone number, just in case you want to have a friendly chat.
Your Info: Name, address, maybe even your Social Security number (in case you forgot).
Details of the Discrepancy: A breakdown of where your numbers and the IRS’s numbers don’t line up.
Proposed Adjustments: Clear instructions on what to do next.

What Are the Consequences of Ignoring It?

Trust us—you don’t want to ignore this. Here’s what can happen if you just shove it into a drawer:

The IRS will go ahead with their proposed changes.
You could end up owing more taxes, plus interest and penalties. It’s like leaving milk out—it’ll only get worse.
If you don’t respond, they might escalate things with a Letter 3219 (Notice of Deficiency)—that’s when it gets real, folks.

Actions to Take if You Receive a CP2000 Notice

Okay, let’s get to the good stuff—what you need to do:

Review the Notice:
- Take a few minutes to actually read it. The IRS laid it all out, just for you.
If You Agree with the Proposed Changes:
- Complete the Response Form included with the notice.
- Sign it, send it back, and if you owe extra tax, pay it ASAP to avoid further interest. You can pay online if you’re not into writing checks.
If You Disagree:
- Gather your supporting docs—W-2s, 1099s, receipts, you name it.
- Fill out the Response Form, but don’t just blindly agree. Attach a letter explaining why you think they’re off and send your evidence along.
- Mail everything back using certified mail (proof of delivery is your friend).
Need to Correct Your Return?
- If you spot a mistake on your end, no worries—just file Form 1040X to amend your tax return.

What’s the Time Frame?

You’ve got 30 days to respond—don’t procrastinate! If you need more time, you can ask for an extension, but ignoring this won’t make it go away. Trust us.

What Should Employers Do?

Sometimes, employers get pulled into this mess too. Here’s how to fix it:

Verify Records: Double-check all your employees’ W-2s and 1099s. Mistakes happen.
Inform Employees: If something’s off, let your employees know so they’re not blindsided.
File Corrections: Use Form W-2c for correcting wages or Form 941-X if you need to amend payroll taxes.
Send the IRS What They Need: If you disagree with the IRS’s findings, send documentation to back up your position.

Call Stellar to Help You Handle This

Dealing with IRS notices is a bit like juggling with fire—best left to the pros. That’s where Stellar comes in. Let us handle the back-and-forth with the IRS so you can focus on what you do best. Our team will walk you through your options and get things resolved without the headache. Check out Stellar's notice resolution service today.

Book a Call Today

Don’t let the IRS ruin your day, require compliance help or notice resolution services? Schedule a consultation with Stellar, and let’s sort this out together. The faster you act, the better your outcome—so don’t wait until the last minute!