How to File a CP2000 Audit Reconsideration

An IRS CP2000 notice proposes changes to a tax return based on discrepancies between the information you reported and data the IRS received from third parties, like employers or financial institutions. It is not a formal audit but an automated inquiry from the IRS’s Automated Underreporter (AUR) unit. The notice is generated when the system detects a mismatch between the income on your Form 1040 and the wages reported on a Form W-2.

If you disagree with the proposed changes, the audit reconsideration process is an option to ask the IRS to review the case with new information. It is used after the IRS has formally assessed the additional tax, but it can also be requested after a Statutory Notice of Deficiency has been issued. This process is distinct from a petition to the Tax Court, which must be filed within 90 days of receiving a Statutory Notice of Deficiency.

Determining Eligibility for Reconsideration

To qualify for audit reconsideration, you must meet several conditions. The process is intended for situations where an oversight or lack of information led to an incorrect assessment. The primary requirement is that the tax has been assessed and remains unpaid. If you have already paid the full amount, the correct procedure is to file a Form 1040-X, Amended U.S. Individual Income Tax Return, to claim a refund.

Another condition is that you must not have previously agreed to the assessment by signing a formal closing agreement, such as Form 906 or Form 870-AD. The IRS will not reopen a case after one has been executed. Similarly, if your case has been decided by the U.S. Tax Court or another court, you are not eligible for audit reconsideration, as the court’s decision is final.

An important eligibility factor is having new, substantive information that was not reviewed during the initial CP2000 process. This could be because you never received the original IRS correspondence or were unable to locate documents at the time. The IRS will only reconsider a case if you provide documentation that could change the outcome of the original assessment.

Required Information and Documentation for Your Request

Your request requires a formal letter stating that you are requesting an “audit reconsideration” for a specific tax year. This letter must include your name, Social Security Number or Taxpayer Identification Number, and the tax year in question.

In your letter, provide a clear explanation for why you believe the assessment is incorrect, directly addressing the discrepancies from the CP2000 notice. For example, if the notice claimed unreported income from a Form 1099-B, your explanation could provide the previously omitted cost basis information.

Your explanation must be supported by documentary evidence. Do not send original documents, as the IRS will not return them. Your submission package should include copies of:

• The original CP2000 notice and any subsequent assessment notice
• Corrected information returns, like a corrected Form 1099 or W-2
• Brokerage statements that show the cost basis of securities sold, for investment income
• The original tax return you filed for the year under review

If the reconsideration is based on a substitute for return (SFR) prepared by the IRS because you did not file, you must submit a properly completed and signed original tax return for that year as part of your request.

The Submission and Follow-Up Process

Mail the complete package to the correct IRS campus, using the address on your original CP2000 notice or the subsequent assessment notice. It is advisable to send the package via certified mail with a return receipt requested. This provides proof of delivery and a record of when the IRS received your request.

After submission, the IRS should send an acknowledgment of receipt, typically within 30 days. During the reconsideration process, which can take several months, collection activities may be suspended. However, this is not automatic. You should call the IRS to confirm that a collection hold has been placed on your account and request extensions if the review process takes longer.

The reconsideration can have one of three outcomes. The IRS may accept your new information and abate, or remove, the entire assessed tax. The IRS could also partially accept your documentation and reduce the assessment. The third possibility is that the IRS denies the request, and the original assessment stands. If your request is denied or only partially accepted, you have the right to request a conference with the IRS Independent Office of Appeals.