IRS Notices and Penalty Resolution

CP2000 is the IRS saying "our computer sees income you didn't report, and here's what we think you owe." It's not an audit — it's an automated document-matching program comparing 1099s, W-2s, and other third-party reports to what you actually filed. Most CP2000s can be resolved by either agreeing to the proposed changes, partially agreeing (with explanation and documentation), or disagreeing entirely with a detailed response. You have 30 days to respond. Ignoring it becomes a formal assessment.

CP14 is the IRS's first bill for unpaid tax — you filed a return showing tax due, the payment wasn't received, and interest and penalties are starting to accrue. The fastest path is to pay the balance or set up an installment agreement. If you believe the notice is wrong (payment was made, return was amended, etc.), you need to respond with documentation within the deadline.

Often, yes. The IRS has several penalty-abatement mechanisms: First-Time Abatement (FTA) for taxpayers with a clean 3-year compliance history, Reasonable Cause abatement for circumstances beyond your control (serious illness, natural disaster, records lost, incorrect advice), and Statutory Exceptions. Abatement requires a written request with documentation — not a phone call. Success rates are high when the case is real and the request is done right.

You have options. Installment agreements (monthly payments) are the most common solution and can often be set up online for balances under $50,000. Offer in Compromise (settling for less than the full balance) is available for taxpayers who genuinely cannot pay in full and meet strict eligibility criteria — it's not easy to qualify, but it's real. Currently Not Collectible status is another option for serious hardship cases. Doing nothing is the worst option.

The IRS generally wants the last 6 years filed to consider you compliant for collection purposes. For voluntary compliance, you start with the oldest year and work forward, using IRS transcripts to reconstruct income if records are missing. Most back-filing engagements run 4–8 weeks and the sooner you start, the fewer surprises the IRS brings up on its own.

Yes, within my scope as a tax preparer. Correspondence audits (mail-based examinations focused on specific line items) are routine. Office and field audits are handled on a case-by-case basis depending on complexity. For tax-court-level disputes or criminal matters, I coordinate with tax attorneys rather than handling them directly.

Form 3520 late-filing penalties can reach 25% of the unreported gift, inheritance, or foreign trust value — often tens or hundreds of thousands of dollars for what was a paperwork omission. These are abatable in many cases under Reasonable Cause if the failure was non-willful. The IRS is currently backing away from automatically assessing many of these after a 2023 policy review, but the defense case still needs to be built. This is my lane — I handle these regularly.

For non-willful failures to file FBARs or Form 8938, the IRS Streamlined Filing Compliance Procedures let eligible taxpayers come into compliance with reduced penalties (or zero penalties for foreign residents). It requires filing 3 years of amended returns, 6 years of FBARs, and a signed non-willfulness certification. It's not appropriate for willful non-filers — different (and more serious) programs apply. Determining eligibility and building the certification case is part of any Streamlined engagement.

Fast. Most IRS notices have 30-day response windows, some 60-day or 90-day. Missing the window doesn't mean you lose forever, but it removes some of your options (e.g., you can still challenge but at a different stage with fewer tools). Bring any notice to me within days, not weeks — the clock is on the IRS's side.