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What is an IRS CP2000 Clarification Letter?
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One of my friends recently got a letter in the mail from the IRS and it freaked them out. The first time I got my official coupons for quarterly estimated payments I freaked out a little because all I saw was an official IRS letter that was thick and ominous looking.
Fortunately, it was “just” a CP2000 letter.
A CP2000 is the letter than the IRS sends out when they want more information from you. The scary part about the letter is that sometimes is says that you may owe more taxes (never a good thing). Fortunately, owing more taxes is generally the worst case scenario. In many instances, they just need to ask you some questions because there were some discrepancies.
Why did you get this? When you file your tax return each year, the information on your return is compared with the information received from other sources. The W-2 that your employer sent you is also sent to the IRS. When there is a discrepancy, the IRS wants to know why. When you consider how complicated the tax return is, with all of your sources of income, various credits and deductions, and the several thousand page rulebook behind it, it’s not surprising that something could slip through the cracks. How many bank accounts do you have? Did each one send a 1099-INT to report interest? Those sorts of situations trigger these CP 2000 clarification letters.
How to properly response: How you respond will depend on how complicated your answer to the questions are. If it’s a simple clarification (”I included the income in this line”) then do it by phone. Call 800-829-8310 if the letter was from Brookhaven, Ogden, or Philadelphia; call 800-829-3009 if the letter was from Atlanta, Austin, or Fresno.
If it’s more complicated and you need to attach documentation like a 1099 you missed or corrected W-2’s, then you’ll have to include a written statement and send it in by mail. If you need time, they will grant you a 30 day extension if you request one and even longer for special cases. You must respond in some way before the due date of the notice.
You can read more about CP 2000 at the IRS.gov website as well as this SMart Money article on the ten things the IRS will not tell you and Bankrate’s mailbag answer on clarification letters.
Remember, there’s no need to panic because this isn’t a bill and you haven’t necessarily done anything wrong.
(Photo: rosengrant)
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We got one of these last year in reference to our 2006 return. It turns out I had reported the wrong W-2 income (used 2005 instead of 2006, not sure how I did that).
Once I figured out the problem, I responded to the IRS with a copy of the correct W-2 as well as what I thought I owed. They agreed and because it was an honest mistake and I responded promptly (and paid the agreed amount), they waived the penalties.
Note that, generally speaking, anything that affects your federal return will probably affect your state return as well. I filed an amended state return and got back a whopping $8
I would wet myself twice if I got a letter from the IRS.
All I got out of this was Fallout 3 is greatness.
Yeah. I’ve never encountered the IRS since I’ve never left the Vault.