Dealing with a CP2000 notice for unreported capital gains - need guidance

Just received a CP2000 notice last Thursday claiming I owe around $13K in capital gains taxes from 2021, plus another $2.5K in penalties and interest, totaling $15.5K. The issue is I never reported some 1099s with my tax return because I thought I was at a net loss overall. Then I discovered wash sales were disallowed. First, I accept responsibility for not understanding wash sale rules - I was trading without proper knowledge and now facing the consequences. Second, I switched brokerages mid-year, and securities transferred from my original brokerage were given a $0 cost basis, making it look like I had 100% profit. I've gone through all my transactions and prepared Forms 8949 for the affected securities that got the $0 cost basis. Then I completed a Schedule D combining the gains reported on my 1099s with the corrected figures from my 8949s. I'm not confident I completed all the paperwork correctly, but I believe my calculations are reasonably accurate. I'm planning to respond with monthly statements from both brokerages, all 1099s, the completed 8949s, Schedule D, and a detailed letter explaining the situation and my calculations. Will the IRS penalize me if my Schedule D isn't perfect? Can they use the monthly statements and 1099s to determine the correct figures themselves? Any help or advice would be greatly appreciated.

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18 comments

Chloe Anderson

•8M

The good news is you're taking the right approach by responding comprehensively with documentation. The IRS generally wants to get to the correct tax amount rather than penalize honest mistakes. When you respond to a CP2000, providing complete documentation is exactly what you should do. Include those monthly statements, 1099s from both brokerages, your completed 8949s and Schedule D. Your explanation letter is crucial - make it clear and concise about the brokerage transfer causing the $0 cost basis issue. The IRS won't penalize you for honest attempts to correct errors. They're looking for the right tax amount, not perfect paperwork. If your calculations are reasonable and supported by documentation, they'll work with that. If they find discrepancies, they'll recalculate and let you know. Make sure to respond before the deadline on your notice (usually 30 days). If you need more time, call the number on your CP2000 and request an extension.

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Chloe Anderson

•8M

Generally, the IRS may reduce or remove penalties if you can demonstrate reasonable cause, and a brokerage transfer causing reporting issues could qualify. Include a specific request to abate penalties in your response letter, explaining why the mistake was reasonable given your circumstances. I usually recommend waiting for their response before paying unless you're certain about what you owe. Once you send your documentation, the IRS will review everything and send a response letter with their determination. If you pay now what you think you owe and they determine you owe less, getting a refund takes additional time.

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Anastasia Fedorov

•8M

I went through something similar with crypto trading and wash sales last year. After getting a CP2000 for about $9k, I discovered taxr.ai https://taxr.ai and it literally saved me thousands. I was completely overwhelmed trying to match all my transactions across multiple platforms, but their system helped me identify exactly where the IRS calculations differed from mine. They analyzed my trading history and helped me properly document wash sales and cost basis issues. I was able to prove I actually owed only about $2.5k instead of the $9k the IRS initially claimed. Their system is specifically designed to help with CP2000 responses for investment transactions.

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Anastasia Fedorov

•8M

The process took me about 3 days total - one day to upload all my documents and get them processed, and then another day or two to review the results and prepare my response. They have an expedited option if you're on a tight deadline, which sounds like it might be helpful in your situation with only 2 weeks left. They work with both traditional brokerages and crypto exchanges. In my case, I had trades across Coinbase, Binance, and Robinhood, and they were able to consolidate everything correctly. Their system is specifically designed for handling multi-platform trading activity. What they do that's difficult to do yourself is properly track cost basis across platforms, correctly identify and categorize wash sales, and generate IRS-ready documentation that explains the discrepancies. The software does the heavy lifting of transaction analysis, but they also have tax professionals who review complex cases. When I tried to reconcile everything manually, I kept making mistakes with the wash sale calculations especially.

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StarStrider

•8M

Update: I wanted to share that I used taxr.ai after seeing the recommendation here, and I'm so relieved I did. My situation was almost identical - CP2000 notice for about $17K including penalties, mostly due to brokerage transfers and wash sales. The tool organized all my trades chronologically across platforms and identified exactly which transactions the IRS had incorrect cost basis information for. It generated all the forms I needed (8949s with proper adjustments and a corrected Schedule D), plus a detailed explanation letter pointing to specific documentation. Just got my response from the IRS yesterday, and they accepted my documentation completely! Instead of owing $17K, I actually only owed about $1,800. The relief is enormous. Definitely worth checking out if you're dealing with CP2000 issues related to investments.

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Zara Rashid

•8M

If you're hitting roadblocks trying to reach the IRS about your CP2000, I'd recommend Claimyr https://claimyr.com - they got me through to an actual IRS agent in about 20 minutes after I spent days trying on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c When I got my CP2000, I had questions specific to my situation that weren't covered in their standard guidelines. After countless failed attempts calling the IRS directly (always disconnected due to "high call volume"), I tried Claimyr and finally got answers. The agent was able to give me specific instructions for my documentation and even extended my response deadline by 30 days.

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Zara Rashid

•8M

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Nia Jackson

•8M

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I was desperate enough to try it since my CP2000 deadline was approaching. I got through to an IRS agent in about 25 minutes after trying for over a week on my own. The agent was incredibly helpful and walked me through exactly what documentation I needed for my specific situation. They even granted me a 45-day extension to gather everything. What surprised me most was how different the advice was from what I read online - the agent gave me specific formatting requirements for my response that weren't mentioned anywhere in the standard CP2000 instructions. If you're dealing with a CP2000, especially for investment-related issues, speaking directly with an agent makes a huge difference in understanding exactly what they're looking for in your response.

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Mateo Hernandez

•8M

Important tip from my experience with CP2000 notices: make copies of EVERYTHING you send to the IRS. I made the mistake of sending original documents and the IRS claimed they never received them. Send your response via certified mail so you have proof of delivery. For the wash sale issue specifically, create a chronological spreadsheet of all your trades for each security. It makes it much easier for the IRS to follow your calculations when they can see the complete trading pattern. I color-coded mine to highlight the wash sales, which the IRS agent later told me was extremely helpful.

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Mateo Hernandez

•8M

I'd recommend using both methods if possible. The online response system is convenient, but in my experience, it has limitations with the number and size of attachments you can upload. What I did was submit the basic response online and noted that additional supporting documentation was being sent by certified mail. When you mail physical documents, always use certified mail with return receipt requested. This gives you proof that they received your package and when. For online submissions, take screenshots of your confirmation page and save any confirmation emails or numbers they provide.

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