The situation
A couple in North Carolina received a CP2000 underreporter notice proposing about $12,000 in additional tax. The IRS’s automated system had matched a brokerage 1099 and an old retirement distribution to their return and flagged a mismatch. The notice looked like a final bill, but it is actually a proposal you can contest.
What we did
- We decoded the notice line by line to see exactly which income items the IRS believed were unreported.
- We found that the brokerage figure ignored the cost basis — the IRS had counted gross proceeds as if they were all gain.
- We documented the correct basis and the portion of the retirement distribution that had already been taxed.
- We submitted a clear, supported CP2000 response and, where a small balance remained, set up a manageable payment plan.
The outcome
The IRS accepted the response and reduced the proposed assessment from $12,000 to about $2,300 — the real additional tax actually due. The couple paid the corrected amount and the matter was closed without it ever becoming a collection case.
A CP2000 is a proposal, not a bill
Underreporter notices are automated and often overstate the tax because the system has no cost basis or context. A documented response frequently reduces or eliminates the proposed amount.
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About these stories
Illustrative client scenarios based on common case types. Individual results vary. These scenarios are composites drawn from common case types we handle at US Certified Tax Services; they are not specific named clients and are provided for illustration only. Outcomes depend on your individual facts and IRS determinations. For a review of your situation, request a free consultation.