Every year, the IRS compares information returns filed on Forms W-2, 1098, 1099, etc., with income and deductions reported on prior year income tax returns. For example, during 1997 the IRS will compare 1995 information returns with 1995 income tax returns. If you forgot to report any income, payments, or credits or overstated certain deductions on your 1995 return, you may receive the Underreporter Notice CP 2000 sometime during 1997. The identifying symbol CP 2000 appears on page 1 in the lower or upper right hand corner.

The notice informs you of the proposed changes to income, payments, credits, or deductions; and the amount due to IRS or refund due to you. It is normally a five to six page letter.

The first page gives you instructions on what you should do if you agree or disagree with the proposed changes.

You are provided with the changes proposed by IRS, the amounts shown on your return, the amounts reported to IRS, and the increase or decrease in income. It also computes the tax liability based on the income changes. It usually proposes that you owe additional tax to IRS, although it may show a refund due to you.

The notice summarizes the income, payments, credits and deductions reported to IRS by payers, but not identified or fully reported on your income tax return. It gives you the name of the payer, the payer's identifying number, what kind of document was issued to you, such as a Form W-2 or 1099, and the social security number of the person it was issued to. Be sure that you review this information carefully to verify that it is correct.

A taxpayer response page is also included. It has boxes for you to indicate whether you fully agree, partially agree, or totally disagree with the proposed changes. It also has an area for you to authorize someone in addition to yourself to discuss and give information to the IRS pertaining to the proposed changes. This page should be attached to your correspondence.

If you agree that the tax changes are correct, sign the fully agreed consent statement on the taxpayer response page. You may pay the amount you owe within 15 days from the date of notice to avoid further interest charges, or you may send the signed consent without payment. We will bill you for the amount due plus additional interest. You may request a payment arrangement to pay the proposed amount you owe IRS. If you wish to pay in installments, please tell us in your response, and we will contact you later with payment information. If an installment agreement is approved, you will be charged a fee.

If you DO NOT agree with the notice or if any part of the summary is incorrect, DO NOT SIGN THE NOTICE. Check box B on the response page, explain why you do not agree in a signed statement, attach the statement and any supporting documents you want us to consider to the response page and send it to us. Include your phone number with area code and best time of day to call.

Do not file an amended return, Form 1040X, to correct items you do not agree with. These are only proposed changes and the tax liability is not yet assessed.

You must respond within 30 days of the date of the notice. If you live outside of the United States you must respond within 60 days of the date of the notice. An envelope will be enclosed for your convenience. Please use this envelope for your response. If you have lost the envelope, please send your response to the address listed in the upper left hand corner on page 1.

If we do not hear from you within the 30 or 60 day period, a statutory notice of deficiency will be issued and additional interest will be charged.

After responding to the notice, if your tax matter has not been resolved to your satisfaction, you may contact the IRS by calling 1-800-829-1040.

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