The IRS CP 2000 Computerized matching program.
Understanding the IRS CP2000 matching program.
When a tax return’s information does not match data reported to the Internal Revenue Service by employers, banks and other third parties, the IRS will send a letter to the taxpayer.
The letter is called an IRS Notice CP2000, and it gives detailed information about issues the IRS identified and provides steps taxpayers should take to resolve those issues.
This is not formal audit notification.
This CP 2000 notice is to see if the taxpayer agrees or disagrees with the proposed tax changes.
Taxpayers should respond to the CP2000, usually within 30 days from the date printed on the notice.
If a timely response can’t be made, taxpayers need to call the toll-free number shown on the notice and request additional time to respond.
IRS matching program is a computer program that the IRS developed to catch taxpayers who did not report all 1099’s and other taxable related documents listed below.
The IRS matching program is a process that selects many tax returns to perform IRS audits.It picks up billons of dollars for IRS.
The IRS reviews each tax return information to make sure all income is reported.
Once the return is filed, it compares the tax return information on these tax returns to the tax return the tax payer have submitted, linking them via social security numbers.
The IRS receives tax information from the following sources among many others:
Employers, wages (Form w2),
Gambling from casinos (Form w2G),
Pensions and annuities (Form 1099-R),
Over $600 from services (Form 1099-MISC),
Banks interest (Form 1099-INT),
Mutual funds from stockbrokers (Form 1099-DIV, or 1099-B),
State unemployment (Form 1099-G),
State income tax refunds (Form 1099-G),
Real estate agents (Form 1099-S),
Corporations , dividends (Form 1099-DIV),
Mortgage interest (Form 1098),
Miscellaneous income (Form 1099-MISC),
Business (schedule K-1).
Keep in mind, this does not mean the IRS is correct.Challenge it if possible.
You need to check your tax returns and the information that IRS is giving you to make sure the IRS adjustment is accurate.
Many times you have expenses against this additional income and if that’s the case you need to file an amended tax return to capture the expense and thus reduce your tax liability.
