The IRS gets data from third parties, for example, companies and financial institutions which don't correlate with the data you have on your return. The Automated Underreporter (AUR) function plays out a correlation with distinguishing potential errors between the data revealed by third parties and what was accounted for on your return. At the point when a possible inconsistency is recognized a tax analyst further reviews the return, contrasting the data revealed with the IRS by bosses, banks, organizations, and different payers on income records (Forms W-2, 1098, 1099, and so on.) to the credits, income, and deductions you report on your income tax form. Peradventure a disparity exists, a Notice CP-2000 is issued. The CP-2000 isn't a bill; it's a proposition to alter your income, credits, payments, or potentially deductions. The alteration may result in further assessment owed or a discount on tax paid.
The main page of the notice gives a synopsis of proposed adjustment to your tax, a telephone number to call for help, and the means you should take to react.
The CP-2000 gives:
Audit the data on the CP-2000 cautiously for precision. Decide whether you concur or may not concur with the proposed changes and how you ought to react. On the Response structure, show whether you agree or can't help contradicting all, a few, or none of the proposed changes. If you might want to approve somebody other than yourself to contact the IRS concerning the notice, incorporate the data mentioned in the Authorization segment of the Response form.
If the IRS sends you a notice, it will clarify the explanation behind the contact and give you directions on the best way to deal with your concern. If you concur with the changes, there's no compelling reason to get in touch with the IRS. Peradventure you owe, adhere to the directions for sending your installment. If you disagree, if it's not too much trouble react as coordinated in your notice. You ought to permit no less than 30 days for an answer from the IRS. In case you've expected a discount and owe no other tax or obligations that the IRS is expected to collect, you'll get the refund in 6 weeks from the notice date.
If IRS send you a second letter or notice mentioning extra data or giving additional information to you, keep duplicates with your records.
Peradventure you made an installment for which you haven't been given credit, send IRS a duplicate of the front and back pages of the canceled check as payment verification. If you paid with a money order, you should acquire a photocopy of the front and back of the canceled money order from where you bought it. In case you paid to utilize the Electronic Federal Tax Payment System (EFTPS) you can send IRS a duplicate of the exchange that incorporates the affirmation number. Do not send original records.
A notice of deficiency is otherwise called a statutory note or a statutory notice of deficiency since tax laws demand that the Internal Revenue Service (IRS) issued a notice of deficiency before evaluating extra income tax, gift tax, estate tax and some excise duties except if the citizen consents to the supplementary evaluation. Even though its language says the IRS is proposing a change, the notice of deficiency is a lawful assurance of tax deficiency that is hypothetically right.
A notice of deficiency is sent when the IRS proposes a change to an expense form since they found that the data gave an account of a return does not coordinate their records. A notice of deficiency is typically activated by tax data derived from an outsider filer, for example, a financial institution or an employer that does not coordinate data detailed by the citizen.
A notice of deficiency is activated by a citizen's inability to react to time or to bid a pre-appraisal letter known as a 30-day letter effectively.
Roland Zita, CPA