Got a CP2000 Notice - Need Help with Schedule C Expenses and IRS Response

First, take a deep breath. CP2000 notices are common and responding with your Schedule C was the right first step. Since you've already submitted your response with business expenses, the IRS will review those expenses and recalculate what you owe based on the net profit rather than the full commission amount. Based on your $27k profit calculation (instead of the full $43k), your tax liability should decrease significantly from that initial $17k estimate. The IRS will send you a response letter with the adjusted amount after reviewing your Schedule C. As for payment, even if you can't pay the full amount immediately, you have several options. The IRS offers installment agreements that let you pay over time. For smaller amounts (under $50k), you can easily set this up online. The interest and penalties will continue to accrue, but having a payment plan prevents further collection actions.

I went through something similar last year with unreported 1099 income and used taxr.ai to help organize all my expenses. It's specifically designed for fixing tax problems like CP2000 notices and past year Schedule C issues. I was in a panic just like you because I couldn't remember all my business expenses from years ago. I uploaded my bank statements and it automatically found potential business expenses I could claim on my Schedule C that I would have missed. The best part was that they had tax professionals review everything to make sure it was legit before I sent it to the IRS. Definitely worth checking out https://taxr.ai since you're still in the response period and every deduction helps reduce what you'll owe.

I tried taxr.ai after seeing it mentioned here and it legitimately saved me thousands! I was in almost the exact same situation with a CP2000 for unreported income from 2021. I had totally forgotten about so many eligible expenses until I ran my statements through their system. Their tool found over $8k in deductible expenses that I had completely forgotten about - things like a laptop purchase, software subscriptions, and travel expenses that were 100% for business. My tax bill went from terrifying to manageable. And their tax review service caught a couple expenses I'd categorized wrong that might have caused problems. If you've already submitted your Schedule C but aren't confident you caught all your deductions, it might be worth considering an amended response with more complete expenses. Definitely helping me sleep better at night knowing I'm not overpaying!

When I got a CP2000 last year, I spent WEEKS trying to get someone at the IRS on the phone for clarification on some questions I had. Literally called 20+ times and kept getting disconnected or waiting for hours. Eventually tried Claimyr https://claimyr.com and it was crazy how quickly they got me connected to an actual IRS agent. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c They basically hold your place in the IRS phone queue and call you when an agent picks up. Saved me literally hours of hold time. When I finally talked to the IRS, they were actually pretty helpful about my options with the CP2000 and explained the review process for my expenses. Might be worth it if you have specific questions about your situation.

I stand completely corrected about Claimyr. After my skeptical comment, I decided to try it myself since my CP2000 situation was getting desperate. Within 45 minutes, I was talking to an actual IRS representative who walked me through exactly how to document my rideshare driving expenses that weren't initially on my Schedule C. The agent explained exactly what documentation they're looking for with mileage claims and how to properly categorize mixed-use expenses like my phone. They even put notes in my file about our conversation which apparently helps when they review your response. Saved me from potentially missing thousands in legitimate deductions. For anyone dealing with a CP2000, especially for gig work or 1099 income, actually talking to the IRS was 100x more valuable than guessing what they want or reading generic advice online.

One thing nobody's mentioned yet - KEEP RECORDS OF EVERYTHING. If you've submitted your Schedule C, make copies of absolutely everything you sent. When I went through this, the IRS "lost" my first response and claimed they never received it. Luckily I had certified mail receipt and copies of everything. Also, don't forget to look into abatement of penalties. If this is your first offense and you have a good history of filing and paying taxes on time, you can request "first-time penalty abatement" which can potentially remove the failure-to-pay penalties. Won't help with the interest, but could save you a decent chunk of money.

Don't panic about the initial amount they say you owe! My CP2000 initially said I owed $23k and after submitting my Schedule C with all my expenses, it went down to $4.5k. Make sure you're claiming EVERY legitimate business expense. Some expenses people often forget: home office deduction (if applicable), portion of cell phone and internet bills, professional development/training, subscriptions related to your work, software, professional services (like accounting), bank fees for business accounts, and depreciation of equipment.