What Triggers a CP2000
The IRS matches billions of information returns (W-2s, 1099s) against tax returns. When discrepancies are found, the Automated Underreporter program generates a CP2000 proposing adjustments. Common triggers: unreported 1099 income, W-2/return discrepancies, unreported 1099-C cancellation of debt, and missing cost basis on securities sales.
Evaluating Proposed Changes
Compare information returns on the notice against your records. The information return may be incorrect (income later reversed, missing cost basis on 1099-B). Income may have been reported in a different location than the AUR expected (1099-MISC reported on Schedule C).
Preparing Your Response
The notice includes a response form: agree, partially agree, or disagree. For disagreements, include clear explanations with documentation: corrected information returns, proof of cost basis, records showing where income was reported. Be organized, concise, and focused on the specific items.
Deadlines
Typically 30 days. Non-response leads to assessment and collection. It is far easier to resolve at the proposed adjustment stage. Extensions are generally available by calling the notice number. If your response is rejected, a Notice of Deficiency provides 90 days for Tax Court petition.
A CP2000 is not an audit and not an accusation. It is a question. A well-documented response often resolves it completely.