Proposed Changes to Your Return (CP2000)

Every W-2, 1099, and 1098 filed about you also goes to the IRS, and its Automated Underreporter program matches those forms against your return, usually a year or more after filing. Common triggers for founders and self-employed filers:

• A 1099-NEC or 1099-K from a client or payment platform that never made it onto Schedule C.
• Stock sales reported on a 1099-B where the broker reported proceeds but the return missed the sale, making the IRS propose tax on the full proceeds instead of the gain.
• Retirement distributions, crypto exchange forms, or interest and dividends from accounts you forgot about.
• Duplicate reporting, where a platform and a client both issued forms for the same income.

The proposed amount is often wrong in your favor once basis, expenses, or duplicates are explained, which is exactly why the CP2000 is a proposal rather than a bill. Self-employed filers should read our 1099 back taxes guide alongside this one.

The IRS asks for a response "within 30 days of the date of the notice or 60 days if you live outside the United States." If it does not hear from you by the response date, the IRS states plainly what happens next: "we'll send you a Statutory Notice of Deficiency." That statutory notice is a fundamentally different document: it starts a fixed window to petition the U.S. Tax Court, and if that window passes, the proposed tax gets assessed and flows into the collection ladder, beginning with a CP14-style bill and ending at levy notices. Responding to the CP2000 itself is dramatically easier than unwinding an assessment later.

If you agree: sign and return the response form and arrange payment. Paying quickly limits underpayment interest, and if you cannot pay in full, an installment agreement can be requested with the response; see the payment plan guide.

If you disagree in whole or part: check the disagree box and send a signed statement with documentation: broker statements showing basis, books showing the income was already reported, corrected 1099s from issuers, or proof a form belongs to someone else. The IRS asks you to "include any supporting documentation you would like us to consider."

If the mismatch reveals a bigger problem, like several unfiled years or self-employment income with no estimated tax payments behind it, solve the pattern rather than the single notice. Accuracy-related penalties proposed on a CP2000 can also be contested with a reasonable cause statement.