How to Navigate a CP2501 Notice: How to Respond to the IRS

Received a CP2501 Notice from IRS, Understanding What’s Next

Did You Receive a CP2501 Notice from IRS?

The Internal Revenue Service issues various notices and letters to taxpayers involving many different issues involving their taxes. Some common reasons that a taxpayer may receive a notice from the IRS are the following:

• • • Unfiled Tax Returns

    • Late-Filed Penalties

    • Late International Reporting Form Filings

    • Soft Letters

Another reason that a taxpayer may receive a notice from the IRS is because the information that they reported on their tax return does not match the information that the tax authorities already have about them. For example, possibly a taxpayer reported that they earned a certain amount of interest from one of their institutions, but based on the information provided by that institution to the IRS, the Internal Revenue Service has a different amount of income the institution claims was earned by the taxpayer and thus results in a mismatch. In this type of situation, the U.S. Taxpayer may receive a CP 2501 notice. Depending on whether the information contained in the notice and the allegations from the IRS are accurate or not will dictate what the taxpayer may due to challenge the notice or acquiesce and submit payment. Let’s take a brief look at how the IRS describes a CP2501 notice:

What is a CP2501 Notice

As provided by the IRS:

• • • “The income or payment information reported to IRS doesn’t match the information you reported on your tax return. This discrepancy may cause an increase or decrease in your tax or may not change it at all.”

What Should You Do Next?

As further provided by the IRS:

• • • Read your notice carefully: Follow the instructions on your notice. It explains the information we received, how to respond, and what will happen if you don’t respond.

    • Respond to the notice. Complete and return the response form and state whether you agree or disagree with the notice. You can submit your response by:

      • • Mail using the return address on the enclosed envelope, or

        • Fax your documents to the fax number in the notice using either a fax machine or an online fax service. Protect yourself when sending digital data by understanding the fax service’s privacy and security policies.

    • If you agree with the information,follow the instructions to sign the response form. We require both spouses’ signatures if you filed married filing jointly.

    • If you disagree or the information reported to us is incorrect:

      • • Complete and return the response form. Provide a signed statement explaining why you disagree and supply any documentation, such as a corrected W-2, 1099 or missing forms, to support your statement.

        • Contact the business or person who reported the information. Ask them for a corrected income document or a statement to support the reason it is incorrect, then send us a copy with your response.

    • If the income in question was later deemed nontaxable due to a state relief payment, financial assistance allocated under the Infrastructure Investment and Jobs Acts, or similar language, provide a signed statement with the response form.

      • • Respond by the due date shown in the notice. If you don’t, we’ll continue processing our case and send you a CP2000 Notice for the proposed amount due.

IRS Tips For Future Tax Submissions

The IRS also provides tips for Taxpayers to try avoid having the same issue in the future.

• • • “You can avoid future problems by:

      • Keeping accurate and full records.

      • Waiting until you get all your income statements to file your tax return.

      • Checking the documents you receive from your employer, mortgage company, bank, or other sources of income (Forms W-2s, 1098s, 1099s, etc.) to make sure they’re correct.

      • Including all your income on your tax return.

      • Following the instructions on how to report income, expenses, and deductions.

      • Filing an amended tax return for any information you receive after you’ve filed your return.”

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms and do not believe they will qualify for the the reasonable cause exception, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

This resource may help taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.