Responding to a CP2000 Notice

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
veeceeone
Posts: 73
Joined: Tue Apr 07, 2015 7:54 pm

Responding to a CP2000 Notice

Post by veeceeone » Sun Jul 07, 2019 5:53 pm

I received a CP2000 Notice recently. I have figured out the reason for the problems and prepared a response. I have read here that a faxed response reaches the correct unit in IRS the fastest and would like to fax my response. However, I am not sure that this will create proof that I responded in time.

Is there a way to create such a proof? Can I send a form of my creation for the IRS to fax back to me? Will they do it? I have also thought about faxing and then sending a backup copy via US Mail? Is this a good idea or will this just muck up things?

Thanks.

User avatar
whodidntante
Posts: 5567
Joined: Thu Jan 21, 2016 11:11 pm

Re: Responding to a CP2000 Notice

Post by whodidntante » Sun Jul 07, 2019 6:03 pm

I am also getting audited, I disagree with the changes to my tax return that the IRS proposed, and I wrote the response yesterday. I plan to make a copy and mail it on Monday. Not registered mail or anything. I don't think the consequence is that horrible if they somehow don't get it, but I could be wrong. I will follow your thread with interest (but hopefully without penalties and interest :happy).

regularguy455
Posts: 102
Joined: Tue Jul 18, 2017 2:08 pm

Re: Responding to a CP2000 Notice

Post by regularguy455 » Sun Jul 07, 2019 6:33 pm

I had a CP2000 a few years back. I made a copy of the response and paid for delivery confirmation. Didn’t have any issues.

armeliusc
Posts: 311
Joined: Wed Dec 21, 2011 9:40 am

Re: Responding to a CP2000 Notice

Post by armeliusc » Sun Jul 07, 2019 7:13 pm

I have gotten a CP2000 notice twice in the last 10 years. The first time was my mistake and I agreed with their correction and simply paid the extra tax. The second time was last year, I made the mistake of not filing the correct forms, but there was no tax consequence so I had to respond. I simply typed up my response, provided some evidence, and filled in what would have been the correct form.

I scanned everything as some kind of proof and simply mailed them with regular mail. Few weeks after the IRS responded that they had closed the case.

I would not worry about just using regular mail. I would not both mail and fax, as it would confuse things. Follow their instruction to the letter. In my CP2000 there is no option to fax, so I just mail it in.

mcraepat9
Posts: 1178
Joined: Thu Jul 16, 2015 11:46 am

Re: Responding to a CP2000 Notice

Post by mcraepat9 » Sun Jul 07, 2019 7:38 pm

veeceeone wrote:
Sun Jul 07, 2019 5:53 pm
I received a CP2000 Notice recently. I have figured out the reason for the problems and prepared a response. I have read here that a faxed response reaches the correct unit in IRS the fastest and would like to fax my response. However, I am not sure that this will create proof that I responded in time.

Is there a way to create such a proof? Can I send a form of my creation for the IRS to fax back to me? Will they do it? I have also thought about faxing and then sending a backup copy via US Mail? Is this a good idea or will this just muck up things?

Thanks.
Keep a scanned copy and send it certified mail return receipt. This has worked for all communication I’ve had with the IRS.
Amateur investors are not cool-headed logicians.

AerialWombat
Posts: 669
Joined: Tue May 29, 2018 1:07 pm

Re: Responding to a CP2000 Notice

Post by AerialWombat » Sun Jul 07, 2019 7:47 pm

Send it certified mail return receipt. Keep the physical green card when it returns.
“Life doesn’t come with a warranty.” -Michael LeBoeuf

HawkeyePierce
Posts: 296
Joined: Tue Mar 05, 2019 10:29 pm
Location: New Zealand

Re: Responding to a CP2000 Notice

Post by HawkeyePierce » Sun Jul 07, 2019 7:57 pm

I had a CP2000 a couple years ago and like others I found it easy to handle. I mailed in my response and a few months later got a letter from the IRS closing the issue and saying I owed no further tax.

Topic Author
veeceeone
Posts: 73
Joined: Tue Apr 07, 2015 7:54 pm

Re: Responding to a CP2000 Notice

Post by veeceeone » Sun Jul 07, 2019 8:08 pm

HawkeyePierce wrote:
Sun Jul 07, 2019 7:57 pm
I had a CP2000 a couple years ago and like others I found it easy to handle. I mailed in my response and a few months later got a letter from the IRS closing the issue and saying I owed no further tax.
Do you remember how many months it took? Thanks.

HawkeyePierce
Posts: 296
Joined: Tue Mar 05, 2019 10:29 pm
Location: New Zealand

Re: Responding to a CP2000 Notice

Post by HawkeyePierce » Sun Jul 07, 2019 8:14 pm

veeceeone wrote:
Sun Jul 07, 2019 8:08 pm
HawkeyePierce wrote:
Sun Jul 07, 2019 7:57 pm
I had a CP2000 a couple years ago and like others I found it easy to handle. I mailed in my response and a few months later got a letter from the IRS closing the issue and saying I owed no further tax.
Do you remember how many months it took? Thanks.
I think it took about 3 months but I received mine and responded during tax season which may have delayed things.

Katietsu
Posts: 2077
Joined: Sun Sep 22, 2013 1:48 am

Re: Responding to a CP2000 Notice

Post by Katietsu » Sun Jul 07, 2019 8:29 pm

If this is a routine CP2000 notice, I would not go out of my way for proof that you responded. I know that it probably requests a response within 30 days. But if you do not answer, they will send another copy asking you again to respond within 30 days. If you got to that point, then you can get proof of the second response.

If you are ready to fax it, I would just do it.

Topic Author
veeceeone
Posts: 73
Joined: Tue Apr 07, 2015 7:54 pm

Re: Responding to a CP2000 Notice

Post by veeceeone » Sun Jul 07, 2019 8:43 pm

armeliusc wrote:
Sun Jul 07, 2019 7:13 pm
In my CP2000 there is no option to fax, so I just mail it in.
There is a fax number in my CP2000. The following video mentions the fax option at Tim 1:25 or so:

https://www.youtube.com/watch?v=3R0POvqL3Ko

I don't want to be agonizing over this for the next several months but perhaps this cannot be helped. I saw a post here where someone mentioned that an IRS employee told him that a faxed return would reach her about a month sooner. I had sent my tax preparer the 1099 for the previous year by mistake and he didn't catch it either. The CP2000 shows the cost basis for about 90% of the listed sales but does NOT use it in calculating the gain. In other words, it treats the whole sale price as gain/income. This results in a very sizable proposed tax. I get nervous when I look at that number.

I have prepared a letter explaining this and also sent the correct 1099 to my tax preparer. I think that he will prepare a new Schedule D and Form 8949 for me to mail.

Topic Author
veeceeone
Posts: 73
Joined: Tue Apr 07, 2015 7:54 pm

Re: Responding to a CP2000 Notice

Post by veeceeone » Sun Jul 07, 2019 8:51 pm

Katietsu wrote:
Sun Jul 07, 2019 8:29 pm
If this is a routine CP2000 notice, I would not go out of my way for proof that you responded.
It is a routine CP2000 notice but the proposed amount is likely to keep me awake at night.

The 1099 from the wrong year was used by mistake. There were about 20 sales resulting in a net loss of about $500. (This was tax loss harvesting.)
However, CP2000 does not use the cost basis in calculating gain/loss, it simply treats the entire proceeds as gain/income. (It does have/show the cost basis.) Here is an example of the CP2000 doing this:

https://kbfinancialadvisors.com/you-got ... -now-what/

" from the CP-2000 Notice, it was clear that the IRS ignored the basis and treated 100% of the proceeds as taxable income.

And that, of course, was wrong, wrong, wrong!"
Katietsu wrote:
Sun Jul 07, 2019 8:29 pm
I know that it probably requests a response within 30 days. But if you do not answer, they will send another copy asking you again to respond within 30 days. If you got to that point, then you can get proof of the second response.

If you are ready to fax it, I would just do it.
This is good to know.

Thanks.

HawkeyePierce
Posts: 296
Joined: Tue Mar 05, 2019 10:29 pm
Location: New Zealand

Re: Responding to a CP2000 Notice

Post by HawkeyePierce » Sun Jul 07, 2019 9:50 pm

Mine was similar. The CP2000 claimed I owed $10k or so. In the end I owed nothing (missed a 1099 because why would any sane person expect Schwab to send me two different 1099 forms?).

A CP2000 is nothing to stress over.

User avatar
billthecat
Posts: 377
Joined: Tue Jan 24, 2017 2:50 pm

Re: Responding to a CP2000 Notice

Post by billthecat » Sun Jul 07, 2019 10:08 pm

I got a CP2000 in 2018 for my 2016 return related to an IRA rollover I did where a check was issued to the receiving entity. I faxed my response in and got a reply three months later, accepting the rollover but still claiming I owed interest and penalties, which obviously made no sense. I replied (fax) again and three months later got closure confirmation.

I was told during this process that it’s likely no human was actually reading my replies.

I faxed it so I would have a confirmation. Obviously that’s a weak piece of evidence but it’s better than nothing and I wasn’t going to go the route of registered mail. Frankly, people should be able to upload a PDF.
We cannot direct the winds but we can adjust our sails.

BespokeBiker
Posts: 12
Joined: Mon Jul 02, 2018 2:16 pm

Re: Responding to a CP2000 Notice

Post by BespokeBiker » Sun Jul 07, 2019 10:44 pm

I received a CP2000 back in early May and am still awaiting the outcome, having replied with lengthy documentation + letter a week after receipt.

I found this article from a Forbes writer to be helpful & calming:
https://www.forbes.com/sites/ashleaebel ... 00-notice/

Topic Author
veeceeone
Posts: 73
Joined: Tue Apr 07, 2015 7:54 pm

Re: Responding to a CP2000 Notice

Post by veeceeone » Mon Jul 08, 2019 1:15 am

billthecat wrote:
Sun Jul 07, 2019 10:08 pm
I faxed it so I would have a confirmation. Obviously that’s a weak piece of evidence but it’s better than nothing and I wasn’t going to go the route of registered mail.
The immediate decision I have to make is "To fax or to go the route of registered mail." As I have written before, someone once has posted on this board that a faxed response reaches the concerned unit faster. Also, doesn't a successful fax show a record of each page being sent to the correct number as opposed to a piece of registered mail that only shows something was mailed but not the actual contents? Am I missing something? If I am right, isn't this a stronger piece of evidence than registered mail?
billthecat wrote:
Sun Jul 07, 2019 10:08 pm
Frankly, people should be able to upload a PDF.
I agree. Also, the computer program generating the CP2000 should subtract the basis from the proceeds when calculating gain (since it has that information and prints it out in the CP2000).

User avatar
Stinky
Posts: 1204
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Responding to a CP2000 Notice

Post by Stinky » Mon Jul 08, 2019 4:44 am

Trust me - your sense of urgency in responding to the IRS is much stronger than the IRS’s sense of urgency in responding back to you.

When I received CP 2000 notice, I was certain that IRS was wrong and was initially flustered. I assembled my proof and sent in my response in about 3 days, registered mail with return receipt. IRS took about 3 months before closing my case with no tax due.

OP, if you want to fax, go ahead. It might clear your case a day or two faster. I prefer the comfort of the little green USPS return receipt card in my files.
It's a GREAT day to be alive - Travis Tritt

Topic Author
veeceeone
Posts: 73
Joined: Tue Apr 07, 2015 7:54 pm

Re: Responding to a CP2000 Notice

Post by veeceeone » Mon Jul 08, 2019 7:18 am

Stinky wrote:
Mon Jul 08, 2019 4:44 am
Trust me - your sense of urgency in responding to the IRS is much stronger than the IRS’s sense of urgency in responding back to you.
ROTFL, ain't that the truth :-)

Topic Author
veeceeone
Posts: 73
Joined: Tue Apr 07, 2015 7:54 pm

Re: Responding to a CP2000 Notice

Post by veeceeone » Mon Jul 08, 2019 1:57 pm

A few more related questions. Tax preparer put the correct data into his software and determined that "I should owe the IRS $135 and get a refund from the state of $211. The IRS clearly says not to amend the tax return but to provide them the data, saying that they will make the corrections if they agree--around 1:38 in the following video.

https://www.youtube.com/watch?v=3R0POvqL3Ko

1. Should I go ahead and send in the $135 or wait for the IRS to bill me? I don't think that this involves any penalties or interest--I will ask the tax preparer whether they include any penalties or interest.

2. I didn't think about the state. I think that I should go ahead and file an amended return to the state, along with an explanatory letter. What do you guys think?

Thanks.

User avatar
billthecat
Posts: 377
Joined: Tue Jan 24, 2017 2:50 pm

Re: Responding to a CP2000 Notice

Post by billthecat » Mon Jul 08, 2019 3:21 pm

veeceeone wrote:
Mon Jul 08, 2019 1:15 am
billthecat wrote:
Sun Jul 07, 2019 10:08 pm
I faxed it so I would have a confirmation. Obviously that’s a weak piece of evidence but it’s better than nothing and I wasn’t going to go the route of registered mail.
The immediate decision I have to make is "To fax or to go the route of registered mail." As I have written before, someone once has posted on this board that a faxed response reaches the concerned unit faster. Also, doesn't a successful fax show a record of each page being sent to the correct number as opposed to a piece of registered mail that only shows something was mailed but not the actual contents? Am I missing something? If I am right, isn't this a stronger piece of evidence than registered mail?
YMMV but in my experience the fax receipt only shows the total number of pages. Of course, neither the fax receipt or registered mail confirmation confirm the contents, which is why it really ought to be a system where you can upload a PDF.
We cannot direct the winds but we can adjust our sails.

armeliusc
Posts: 311
Joined: Wed Dec 21, 2011 9:40 am

Re: Responding to a CP2000 Notice

Post by armeliusc » Thu Jul 11, 2019 9:01 am

veeceeone wrote:
Sun Jul 07, 2019 8:43 pm
armeliusc wrote:
Sun Jul 07, 2019 7:13 pm
In my CP2000 there is no option to fax, so I just mail it in.
There is a fax number in my CP2000. The following video mentions the fax option at Tim 1:25 or so:
There is a fax number in CP2000, but the instruction in Response Form clearly and explicitly says "send it to us in the enclosed envelope so we can receive it by ... ". Why then would I risk thing by trying to speed things up by using Fax? And I didn't have a fax machine handy anyway. And as someone else had said, the IRS's sense of urgency is clearly much less that the taxpayer's.
veeceeone wrote:
Sun Jul 07, 2019 8:43 pm

I don't want to be agonizing over this for the next several months but perhaps this cannot be helped. I saw a post here where someone mentioned that an IRS employee told him that a faxed return would reach her about a month sooner. I had sent my tax preparer the 1099 for the previous year by mistake and he didn't catch it either. The CP2000 shows the cost basis for about 90% of the listed sales but does NOT use it in calculating the gain. In other words, it treats the whole sale price as gain/income. This results in a very sizable proposed tax. I get nervous when I look at that number.
The proposed tax amount is irrelevant if you know it's wrong and can be corrected. My proposed tax was some $16K, but I knew it was wrong. So I sent my response and didn't worry about it until IRS responded back. No need to agonized over it.

percolate
Posts: 4
Joined: Wed Jan 03, 2018 11:28 am

Re: Responding to a CP2000 Notice

Post by percolate » Thu Jul 11, 2019 10:41 pm

I highly recommend calling the IRS' CP2000 line before faxing/mailing in a formal response. As a data point, I received a CP2000 today regarding a 1099-R the IRS had double-counted. I had to wait on hold for half an hour, but once I had a person on the line they immediately spotted the mistake, apologized, and cancelled the notice.

I've always found the IRS' phone support to be around the same quality as Vanguard's: A little bureaucratic, but overall friendly and competent.

Topic Author
veeceeone
Posts: 73
Joined: Tue Apr 07, 2015 7:54 pm

Re: Responding to a CP2000 Notice

Post by veeceeone » Sun Jul 14, 2019 3:53 pm

I have prepared a detailed reply, scanned it, and sent the electronic version to my tax preparer for review. (I used to live in his town but have now
moved about 60 miles away but still use him.) Once he agrees that it is good to go, I plan to mail the hard copy to the IRS with the return receipt option.

Once I receive the return receipt, I plan to call the CP2000 line and let them know what happened and what kind of documents I have sent. I completely realize that this is rather superfluous. However, I don't see any problems doing this. All I want them to do is to make a note of what I am saying. I don't quite expect them to cancel my CP2000. (By mistake, I had sent the wrong year's 1099 to my tax preparer--he didn't catch the error either. The new set of documents are based on the correct year's 1099. The IRS would want to see the Schedule D and Form 8949 based on the correct year's 1099 before they will close this CP2000. The tax I end up owing is only $135. This was for Tax Year 2017. As I understand the rules, I don't think that I will be charged a substantial understatement of income tax penalty.) Any advice regarding this? Thanks.

HawkeyePierce
Posts: 296
Joined: Tue Mar 05, 2019 10:29 pm
Location: New Zealand

Re: Responding to a CP2000 Notice

Post by HawkeyePierce » Sun Jul 14, 2019 4:46 pm

Two thoughts:

1) If you have a tax preparer why isn't he dealing with all of this?

2) There is no need to call. Just mail off your response, it will work out.

A CP2000 is not a big deal. This isn't anything to lose sleep over. :)

Topic Author
veeceeone
Posts: 73
Joined: Tue Apr 07, 2015 7:54 pm

Re: Responding to a CP2000 Notice

Post by veeceeone » Sun Jul 14, 2019 6:43 pm

HawkeyePierce wrote:
Sun Jul 14, 2019 4:46 pm
If you have a tax preparer why isn't he dealing with all of this?
He prepared the documents, we met in person, and I brought them home. While reviewing them at home, I found one error and pointed this out to him. He modified the documents and sent them by email. I want him to review the whole package one more time before I mail it off. This scanned file also serves the purpose of being my final copy (as well as his). Also, I think that he can do a better job of reviewing the package sent via email as opposed to me and my wife standing in front of him and distracting him.

One good thing to come of all these is that a relationship is getting built between him and us. He is new to us. I have been using this family based business for a long time but my previous guy (whose children and ours went to all 12 grades of school together) retired after the 2017 tax year.

Based on this experience, I am going to at least check that the data input is correct. Previously, I didn't even do that. I had sent the 1099 for the wrong year and the previous guy didn't catch it. If I had checked, I would have caught the error.

I don't understand the calculations involved. I have thought of using Turbo Tax to just double check. I still like having the advice of a knowledgeable human who asks me the right questions. If I did it myself, I may miss some things and will also take a much longer time, better spent in my other activities.

Katietsu
Posts: 2077
Joined: Sun Sep 22, 2013 1:48 am

Re: Responding to a CP2000 Notice

Post by Katietsu » Sun Jul 14, 2019 6:46 pm

If you are responding by mail in a timely manner, there is no reason to call. I would send what you owe them. It seems clear. There is a good chance they will not even follow up for any interest or penalties given the nature and size of the error.

I would file amended for the state. Then try to forget about for a while.

Is this the advice of your tax preparer?

Topic Author
veeceeone
Posts: 73
Joined: Tue Apr 07, 2015 7:54 pm

Re: Responding to a CP2000 Notice

Post by veeceeone » Sun Jul 14, 2019 6:54 pm

Katietsu wrote:
Sun Jul 14, 2019 6:46 pm
If you are responding by mail in a timely manner, there is no reason to call. I would send what you owe them. It seems clear. There is a good chance they will not even follow up for any interest or penalties given the nature and size of the error.

I would file amended for the state. Then try to forget about for a while.

Is this the advice of your tax preparer?
We are filing amended for the state. What you said is the advice of the tax preparer, with two exceptions:

1. He suggested that we file an amended Federal also, but mark it as CP2000. (CP2000 gives us this option.)

2. He also suggested that we not send any money at this time but wait for them to send us a bill.

CrazyPuli
Posts: 4
Joined: Sat Jun 22, 2019 7:43 pm

Re: Responding to a CP2000 Notice

Post by CrazyPuli » Sun Jul 14, 2019 7:14 pm

veeceeone wrote:
Mon Jul 08, 2019 1:57 pm
1. Should I go ahead and send in the $135 or wait for the IRS to bill me? I don't think that this involves any penalties or interest--I will ask the tax preparer whether they include any penalties or interest.
I've gotten a couple of these over the last 5 years. One was my mistake, the other was Schwab's. In both cases I was not going to owe what they said I did. I sent them the full amount along with an explaination of what I thought it should be. They sent me a refund check for the difference. I thought it was better to play it safe and not risk any additional intrest.

ryman554
Posts: 1193
Joined: Sun Jan 12, 2014 9:44 pm

Re: Responding to a CP2000 Notice

Post by ryman554 » Mon Jul 15, 2019 12:16 am

veeceeone wrote:
Sun Jul 14, 2019 6:43 pm
HawkeyePierce wrote:
Sun Jul 14, 2019 4:46 pm
If you have a tax preparer why isn't he dealing with all of this?
He prepared the documents, we met in person, and I brought them home. While reviewing them at home, I found one error and pointed this out to him. He modified the documents and sent them by email. I want him to review the whole package one more time before I mail it off. This scanned file also serves the purpose of being my final copy (as well as his). Also, I think that he can do a better job of reviewing the package sent via email as opposed to me and my wife standing in front of him and distracting him.

One good thing to come of all these is that a relationship is getting built between him and us. He is new to us. I have been using this family based business for a long time but my previous guy (whose children and ours went to all 12 grades of school together) retired after the 2017 tax year.

Based on this experience, I am going to at least check that the data input is correct. Previously, I didn't even do that. I had sent the 1099 for the wrong year and the previous guy didn't catch it. If I had checked, I would have caught the error.

I don't understand the calculations involved. I have thought of using Turbo Tax to just double check. I still like having the advice of a knowledgeable human who asks me the right questions. If I did it myself, I may miss some things and will also take a much longer time, better spent in my other activities.
That's not really a good thing.

You should understand the calculations in your tax forms. Because, ultimately, you are responsible for their correctness, whether you use a preparer or not

If all you have are 1099R,. then taxes should be a breeze to do by yourself. The math isn't that hard, and it would do you good to break out the pencil and paper to do a form by hand once. Once you can do that, something like TurboTax or the cheaper/free alternative can be used to avoid simple math error, while understanding if the return is correct or not.

This advice changes once you have non low frequency mutual fund investments.... But not by much. You owe it to yourself to learn, so you don't have to rely on /pay for a "friend" to do your work.

I say this because, if your friend really submitted this return with the wrong year 1099 (REGARDLESS of if it was your mistake or theirs) , they aren't a very good tax preparer, and certainly not worth your money,. because they do not have good attention to detail.

Post Reply