IRS CP2000 Notice: What to Do With the 30 Days You Have.

An envelope from the IRS lands in September with tax year 2024 printed on it and a number at the bottom: $18,070. The return was filed on time, the refund came and went, and nothing has happened since. The notice is a CP2000, and two things about it matter more than the number. It is not a bill. And it is almost certainly too high, because the computer that produced it never saw what you paid for the stock you sold.

Every W-2, 1099, 1098, K-1, and 5498 filed under your Social Security number gets matched against the return you filed. That job belongs to the Automated Underreporter program, and it is not a small operation: the IRS closed 987,460 AUR cases in fiscal year 2025 and assessed $5.9 billion. It reports that work in its compliance presence statistics separately from audits, because this is not one. Rev. Proc. 2005-32 treats a contact made to verify a third-party discrepancy as something other than an examination, inspection, or reopening of your return.

The program runs 12 to 24 months behind, so a notice arriving in the fall of 2026 is almost always the 2024 return. No revenue agent read it. A machine found a document it could not match to a line and printed the worst-case version of what that document might mean. The IRS then has three years from the later of the due date or the filing date to assess under §6501(a), which is why these land when they do.

Start with the enclosed pages listing each item the IRS could not match: the payer, the form type, the amount reported to the IRS, and the amount it found on your return. Pull that year's return and find every item. One of three things is usually true. The income really is missing, and you agree. The income is on the return but somewhere the matcher did not look, and you point at the line. Or the amount is right and the tax is wrong, which is the cost basis case below.

Mark the response form, sign it, and send it back with a short explanation and the documents that prove it, through the IRS Document Upload Tool, by fax, or by mail to the address on the notice, a process Topic 652 walks through. Do not file a Form 1040-X for that year. An amended return sits in a different queue than the AUR case, and filing one is a good way to get assessed while your explanation is still in the mail. If 30 days is not enough time to pull old broker statements, call the number on the notice; the IRS routinely grants another 30.

Form 1099-B has a box for whether the basis was reported to the IRS. For shares bought before the covered-security rules phased in, lots transferred between brokers, inherited or gifted shares, and a great deal of ESPP and RSU stock, the answer is no. The AUR system sees $92,000 of proceeds and no basis, so it proposes tax on $92,000 of gain. Leave Schedule D off the return entirely and that is the number that comes back.

The same overstatement arrives other ways. A 1099-NEC you did report on Schedule C, buried in a gross receipts total, reads as unreported. A distribution you rolled over inside 60 days shows up on a 1099-R with a taxable amount the custodian had no way to know was zero. The pattern: the notice proposes tax on a gross number where your return reported a net one. The ESPP basis problem is this same defect a year earlier, on the return itself.

IRC §6662(a) and (b)(2) impose a 20% accuracy-related penalty on the portion of an underpayment attributable to a substantial understatement of income tax. For an individual, §6662(d)(1)(A) defines substantial as an understatement exceeding the greater of 10% of the tax required to be shown on the return or $5,000. Document the basis and the understatement usually drops under $5,000, and the penalty goes with it. That is the cleanest way to kill it. No argument about fault, just a smaller number.

When the income really was missing and the penalty sits on a correct deficiency, first-time abatement will not help. That waiver covers failure to file, failure to pay, and failure to deposit, and this penalty is none of the three. The relief is reasonable cause and good faith under §6664(c)(1), decided mostly by the effort you made to get the tax right, and a Form 843 claim is the vehicle once the penalty has been paid.

Interest under §6601 runs from the original due date regardless, so it is already 17 months deep by the time you open the envelope, at 7% compounded daily for the quarter beginning October 1, 2026 under Rev. Rul. 2026-15 in Internal Revenue Bulletin 2026-36. The failure-to-pay penalty of §6651(a)(2), 0.5% per month up to 25%, does not start until the tax is assessed and the IRS demands payment. One more reason to answer before it gets there.

Ignore the CP2000 and the IRS issues Notice CP3219A, the statutory notice of deficiency, also called the 90-day letter. §6213(a) gives you 90 days from the mailing date, or 150 days if the notice was addressed to you outside the United States, to petition the United States Tax Court. That deadline is jurisdictional. Miss it by a day and the Tax Court cannot hear the case, and it is the only forum where you can dispute the tax without paying first. The IRS cannot extend that deadline, which is not true of the 30 days on the CP2000.

Agreeing at that stage means signing Form 5564 and waiving the restriction on assessment. Doing nothing means the tax gets assessed anyway and collection starts. Neither is worse than what the CP2000 proposed, and both are worse than a two-page letter sent in week two.