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IRS statistics show that one out of every three CP2000 notices (also called underreporter inquiries) doesn't result in the taxpayer owing more taxes. But, to show the IRS that you don't owe, you must respond effectively.

The most likely penalty is the 20% accuracy penalty added to your tax bill. You can contest the penalties in your CP2000 response, even if you agree with the tax the IRS proposed in your CP2000 notice. Be sure that your response explains the facts, law, and arguments for why the IRS shouldn't charge you the penalties.

If an individual or business ignores a mail audit, the IRS may: Alter the return to make it more accurate ing to the information they have. This could include adding income or removing deductions. Assess taxes and penalties and send a 90-day letter (or notice of deficiency) regarding them.

What you need to do Read your notice carefully. ... Provide a timely response. ... Complete the notice response form and state whether you agree or disagree with the notice. ... If you agree with the proposed changes, follow the instructions to sign the response form. ... If you disagree, complete and return the response form.

The average individual's chances of being audited are pretty slim: Of the roughly 165 million returns the IRS received last year, approximately 626,204, or less than 0.4%, were audited. A review of a federal tax return can be triggered at random, but certain behaviors are more likely to be flagged than others.

What you need to do Read your notice carefully. ... Provide a timely response. ... Complete the notice response form and state whether you agree or disagree with the notice. ... If you agree with the proposed changes, follow the instructions to sign the response form. ... If you disagree, complete and return the response form.

The worst thing you can do when you receive a CP2000 is to ignore it, which will almost certainly result in additional penalties and interest.