The IRS Notice CP2005 is to inform taxpayers that their Form 1040 Inquiry is closed. The IRS Automated Under-reporter Unit (AUR) issues IRS notice CP2005 to inform taxpayers that AUR is closing their case with no changes made to their tax returns. This means that the IRS accepted the information taxpayers sent them and they are not going to change their tax return. They have closed their review of it and they want them to know. This notice falls under the category of “tax return accuracy”. Before taxpayers receive this particular notice, they usually receive IRS notice CP2000 which indicates that their tax returns don’t match income information the Internal Revenue Service (IRS) has (like Forms W-2 and 1099). The notice is also called an under-reporter inquiry. This notice basically proposes taxes, and possibly penalties, you might owe for missing income on your return. Sometimes, the Internal Revenue Service can question deductions or credits you took that don’t match information statements filed under your Social Security Number. So receiving IRS notice CP2005 is simply telling you that your case has been resolved. With that said, we would look at the common reasons taxpayers receive notice CP2005. They include:

  • The IRS Automated Under-reporter Unit (AUR) informed taxpayers that the IRS was reviewing their tax return because of possible discrepancies between their income, credits or deductions reported on their return and information the IRS received from others such employers and banks.
  • After researching your client’s situation, AUR determined that no changes needed to be made to your original tax return.
  • The AUR sent CP2005 to inform you that your case has been closed and there are no changes to the original return filed with the IRS.

After receiving this notice, all you need to do is to read it carefully and understand what the IRS is trying to tell. The letter is straight-forward and brief so you don’t need the assistance of a tax professional. You don’t have respond to the notice but you should keep a copy of this notice in your files for future references. You may be wondering what Automated Under-reported cases are. According to the IRS definition, “Automated under-reporter” (AUR) cases are systemically identified through computer matching of tax returns with corresponding payer information documents. Cases are selected for inventory in a manner determined to provide overall compliance coverage. Selected cases undergo an in-depth review by a tax examiner to identify under-reported and/or over deducted issues which require further explanation to resolve the discrepancy.The automated under-reporter (AUR) unit is a division of the IRS that screens tax returns for mismatches between the income you reported on your tax return and the income reported to the IRS by your employers, banks, and other payers.

UNDER-REPORTED INCOME

According to the IRS Definition, The IRS compares the payment information reported to the IRS by employers, banks, businesses, and other payers on income documents (Forms W-2, 1098, 1099, etc.) to the income, credits, and deductions you report on your income tax return. The Automated Under-reporter (AUR) function uses an automated system for this comparison and sends out a Notice CP2000 if you didn’t report income on your return that was reported to the IRS by a payer or if it appears that payments, credits, and/or deductions are overstated. The IRS compares information statements (Forms W-2, Forms 1099, etc.) reported under your Social Security number (SSN) to the information on your tax return. If the IRS’ computer system finds a mismatch, it may mean that you have under-reported income. The IRS may send an under-reporter notice to request more information from you to resolve the income mismatch. In order for you to understand notice CP2005, you need to first understand what notice CP2000 entails.

THINGS TO TAKE NOTE OF

  • The IRS can take long to contact taxpayers about the end result of the issue. The reason is that their computer systems match the information taxpayers report on their tax returns with information reported by employers, banks, businesses, and others. This matching takes several months to complete, which explains the delay to notify taxpayers.
  • If you sent the IRS a payment based on the changes the IRS proposed, you will definitely receive a refund check in 4 to 6 weeks as long as you do not owe taxes or other debts the IRS has to collect. You can contact the IRS if you don’t get a refund for any payment you made on the proposed changes. You contact them by mail or by calling the number provided on the CP2005 notice you received to know why you have not seen your refund.
  • If you petitioned the United States Tax Court, the Office of Chief Counsel will contact you about closing your petition.
  • If you feel the IRS closed my case without changing your account and you think the IRS closed the account in error, feel free to call the toll free number provided on the notice sent to you.
  • If you receive another notice or letter and it is about this matter, pay no attention to it. If it’s about another matter, read it carefully and follow its instructions.

TAX TIPS

  • Taxpayers should check the records they get from their employer, mortgage company, bank, or other sources of income (W-2s, 1098s, 1099s, etc.) to make sure they’re correct.
  • Taxpayers should include all the income they received during the year on their tax returns.
  • Taxpayers should follow the instructions for their tax returns on how to report income, expenses and deductions.
  • Taxpayers should wait until they get all of their income statements to file their tax returns.
  • Taxpayers should file an amended tax return if they receive any additional information after they have filed their tax returns.
  • Taxpayers should consider filing their taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for.

NOTICE DEADLINE –There is no deadline for this notice. In fact, you don’t even have to respond to the IRS in anyway. However, you can choose to contact them if you are expecting a refund from them as a result of some changes they may have made on your tax return form.