How and when to contest your CP2000 inquiry

When you get a CP2000 notice, follow these steps to look into it. If you don’t want to go it alone, we can help figure out your issue and work with the IRS on your behalf.

Here is information about how to contest a CP2000 notice and when you should do it.

A CP2000 inquiry can end in one of four ways:

1. No change: This happens when you successfully prove that your return is correct as filed. In this case, you will get IRS notice CP2005 notifying you that you don’t owe additional tax.
2. No change, with adjustments: This is when the IRS makes changes to your return, but you don't owe any more taxes.
3. You agree: The IRS proposed changes on your return, and you agree and pay the added taxes.
4. You disagree: The IRS proposed changes to your return, and you don’t think the IRS is correct. In this case, you can appeal.

If you disagree with the IRS about your CP2000 notice, you have options

Respond to the IRS with your CP2000 disagreement. Make sure that in every response, you request an appeal with the IRS Independent Office of Appeals in case the IRS disagrees with your response. It’s best to request an appeal before the IRS charges, or assesses, the taxes, so be proactive.

Here are the options available to you at every step in the CP2000 process:

When you get the CP2000 notice

This notice often acts as a 30-day letter, which marks the beginning of the timeframe you have to contest the changes the IRS is proposing to your return and request an appeal if the IRS disagrees. In your CP2000 response, you will need to protect your appeal rights by requesting an appeal with the IRS Independent Office of Appeals in case the IRS disagrees with your response.

When you get the Statutory Notice of Deficiency

If you fail to respond to the CP2000 notice or the IRS disagrees with your response and determines that you have a deficiency in your income tax return, the IRS will send you a Letter 3219, Statutory Notice of Deficiency.

This notice is also called a 90-day letter. It’s a legally required letter that explains the amount the IRS thinks you owe and your options. You have 90 days (150 days if the notice is addressed to a person who is outside the U.S.) from the date of this letter to petition your case to the U.S. Tax Court. After 90 days, if you don’t contest the IRS changes to your return, or if you waive your rights to contest, the IRS can send you a bill for the added tax, penalties, and interest.

Sometimes, when taxpayers receive a 90-day letter, it’s clear that the IRS didn't consider their original response to the CP2000 notice. You’ll know if the IRS hasn’t considered your response if the next IRS letter you get proposes or assesses the same amount of tax as the original notice you received and disregards your response without explanation. This generally happens because the IRS runs out of time to review responses, or taxpayers don't respond in time before 90-day letters are automatically sent. In this case, look to CP2000 reconsideration as a possible way to correct the issue.

Check out How to Request CP2000 Reconsideration

After the 90-day letter deadline

If the deadline passed for you to respond to your 90-day letter, the IRS will assess the tax and you can contest the IRS assessment by:

• CP2000 reconsideration, if you missed the deadline to respond or didn’t have the opportunity to present your facts or appeal the CP2000 inquiry.
• Following claim for refund procedures. This would mean you’d have to pay the balance owed and file a claim for refund (in most cases, with an amended return or Form 1040X). If the IRS denies your claim or doesn't act within 6 months of the date you filed your claim, you can file suit in federal district court to recover the money you paid. However, claim for refund procedures aren’t practical for many taxpayers.

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About the Author

Jim Buttonow, CPA, CITP, is the Senior Vice President for Post-Filing Tax Services at Jackson Hewitt. He’s been a leader in helping taxpayers and tax professionals resolve tax problems with the IRS, where he had worked for 19 years in various compliance-enforcement positions. Prior to his current role, Jim’s consulting practice focused on the areas of tax controversy and tax administration, which included leading product development on tax problem software for tax professionals, testifying before Congress, advocating for IRS transparency and efficiency, and proposing innovative large-scale solutions for taxpayers and tax professionals. Jim is also the author of Tax Problems and Solutions Handbook, a publication aimed at helping tax pros work more effectively in post-filing matters and resolving their clients’ most common tax problems.

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