What is a CP2000?
CP2000 is the IRS's "underreporter inquiry" — a proposed adjustment based on third-party data (W-2, 1099, FATCA reports) that doesn't match what you reported.
It's NOT an audit. It's a notice with a proposed change. You can agree or contest.
What triggers CP2000 for NRIs?
Common NRI triggers:
- Indian bank FATCA reporting interest not on your Schedule B
- US broker dividends not reported
- 1099-B sale not reported on Schedule D
- 1099-K from payment processors (Stripe, Square)
- 1099-MISC consulting income not on Schedule C
- W-2 issued but missing from return
What does CP2000 contain?
- Proposed adjustment amount
- Source data they used (1099 form details)
- Recalculated tax
- Penalty estimate
- Response options
- Deadline (typically 30 days)
Don't panic
CP2000 is a proposal, not a final assessment. You have rights to respond. Many CP2000s are resolved with simple explanations.
Response options
- Sign and return the response form
- Pay the additional tax + interest + penalty
- Closes the issue
- Use this if their data is correct and you missed it
- Return response form with disagreement
- Attach explanation and supporting docs
- IRS reviews, may agree with you, may persist
- Some items agreed, others contested
- Detail in response
Common NRI explanations
Example: Indian bank interest reported under "Foreign income" but FATCA shows interest source
Response: Show your Schedule B includes the interest, just labeled differently
Example: Indian capital gain reported, but IRS recalculation missed your Form 1116 FTC
Response: Recompute with FTC, show net tax owed is less
Example: Broker reported gross sale proceeds; you sold at loss
Response: Provide basis, show real gain/loss
Example: 1099 issued to wrong SSN (clerical error)
Response: Documentation showing 1099 isn't yours
Example: IRS treated you as resident, but you're non-resident and should file 1040-NR
Response: Argue status; may require amending to 1040-NR
Deadlines
30 days from notice date to respond. Failure to respond = IRS assesses the proposed tax + penalties.
If you need more time, request extension before deadline — usually 30 more days granted.
Documentation to attach
- Tax return for the year (showing what you reported)
- 1099 / W-2 / FATCA forms IRS cites
- Supporting docs for your position (bank statements, FTC calculations, etc.)
- Indian Form 16 / Form 26AS if relevant
- Explanation letter — clear, dated, structured
Power of Attorney
Use Form 2848 to authorize us to respond on your behalf. We become your representative and IRS communicates with us.
Penalty considerations
CP2000 typically proposes:
- Accuracy-related penalty (20% of underpayment)
- Substantial understatement penalty (20% if understatement > 10% of correct tax or $5,000)
- Interest from original due date
We can argue penalty abatement based on:
- Reasonable cause (good faith effort, complex rules)
- Reliance on professional advice
- First-time penalty abatement (no penalties in prior 3 years)
For NRIs, "reasonable cause" often succeeds because cross-border rules are objectively complex.
When to engage us
Pricing:
- Standard CP2000 response: $350
- Complex CP2000 (multi-year, large amount): $750–$1,500
- Power of attorney included
We aim for resolution within 30-day initial response window.
Common CP2000 mistakes
- Ignoring notice (IRS assesses default)
- Paying without verifying their calculations
- Not providing supporting documents
- Missing 30-day window
- Failing to amend return when needed
What if IRS persists after my response?
IRS sends second notice (CP2501) or proceeds to Statutory Notice of Deficiency (CP3219A — 90-day letter). At that point:
- Tax Court petition is your right (90 days)
- Or accept assessment and pay
For complex cases, escalating to attorney + Tax Court may be worth it. For modest amounts, accepting and paying may be cheaper.
Practical advice
- Respond within 30 days — extension if needed
- Verify their data — sometimes wrong
- Calculate corrected tax with all credits — they may have missed your FTC
- Document everything — letters, calculations, supporting forms
- Engage representation for complex cases
Explore our complete US Tax Return Guide to understand refunds, filing rules, and IRS procedures for NRIs.