Grad student received CP2000 notice - confused why I owe so much for stipend income?

What you're experiencing is actually quite common for graduate students. The CP2000 notice is basically the IRS saying their records don't match what you reported on your tax return. The dividend issue is straightforward - if you had investments that paid dividends and you didn't report them, you would owe tax on that income. But the self-employment tax issue is likely the bigger misunderstanding. Many universities report stipends on a 1099-MISC (or now 1099-NEC) rather than a W-2, which makes the IRS think you're self-employed when you're not. Graduate stipends are usually considered scholarship/fellowship payments, not self-employment income, so they shouldn't be subject to self-employment tax. You should absolutely respond to the CP2000 with a clear explanation and documentation. Include a copy of your stipend letter from the university that shows it's a scholarship/fellowship payment, not compensation for services. Also include any tax forms you received from the university.

I went through something similar with my grad school stipend last year. After hours of research online, I found this website called https://taxr.ai that completely saved me. They specialize in analyzing tax notices and transcripts to identify errors. I uploaded my CP2000 notice and my 1099-MISC, and they quickly showed me exactly why the IRS was misinterpreting my stipend as self-employment income. Their analysis explained how scholarship/fellowship payments for degree-seeking students are treated differently for tax purposes. The best part was they helped me draft the perfect response to the IRS, and my case was resolved without having to pay the ridiculous self-employment tax they were trying to charge me.

Just wanted to update everyone - I ended up trying https://taxr.ai after my initial skepticism and I'm honestly impressed. I uploaded my CP2000 and within hours they identified that my university had incorrectly coded my research assistantship stipend on the 1099, which is why the IRS system flagged it as self-employment income. Their analysis broke down exactly which box on my tax forms was causing the confusion and provided me with specific citation language from IRS publications about qualified scholarships vs. compensation. I submitted their recommended response to the IRS last week, so now I'm waiting for their reply. But at least now I understand exactly what happened and feel confident I won't have to pay that ridiculous $8K they were trying to charge me!

If you're still waiting to hear back from the IRS, trying to call them directly might help speed things up. I had a similar situation with a CP2000 notice a few months ago, and I kept calling but could never get through - just endless hold times and disconnections. I finally found this service called https://claimyr.com that actually got me connected to an IRS agent in under 45 minutes when I had been trying for weeks. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. They basically keep dialing for you and then call you when they've got an agent on the line. After speaking with the agent directly, I was able to get immediate clarification about my notice and they put a temporary hold on collections while I gathered my documentation. Saved me so much stress since I was approaching deadline and penalties would have started accruing.

Well I was definitely skeptical about Claimyr, but after trying for THREE DAYS to reach someone at the IRS about my CP2000 notice (and getting disconnected every single time), I decided to give it a shot. Honestly shocked at how well it worked. I got a call back in about 35 minutes saying they had an IRS agent on the line. The agent was able to immediately put a 60-day hold on my case while I prepare my response. She even gave me her direct ID number to reference in my paperwork. Now I can gather all my grad school stipend documentation without stressing about missing the deadline or accumulating more penalties. For anyone dealing with these notices and getting nowhere with the IRS phone system, it's absolutely worth it. Can't believe I wasted so many hours trying to do it myself.

Have you checked if your university reported your stipend on a 1098-T form as well? Sometimes universities mess up and report the same money on both a 1099-MISC AND a 1098-T, which really confuses the IRS systems. In my case (also grad student), my stipend was partly for teaching and partly for research, and the university incorrectly reported it on multiple forms. I had to get a letter from my department explaining exactly what the stipend was for and what percentage was for teaching vs. research fellowship.

Um actually I think everyone here is missing something important. Graduate stipends ARE subject to income tax but NOT self-employment tax, unless your specifically working as an independent contractor for the university (which almost no grad students are). When u get a 1099-MISC or 1099-NEC for your stipend, you should report it on the "Other Income" line (Line 8 on the 2022 Form 1040), NOT Schedule C. If you accidentally reported it on Schedule C, that would trigger self-employment tax of about 15.3% on top of regular income tax!

Hey Zoey! I went through almost the exact same situation last year as a PhD student. The key thing to understand is that CP2000 notices are generated automatically when the IRS's computer systems detect a mismatch between what third parties reported about your income (like your university's 1099-MISC) and what you reported on your tax return. For the dividend income - if you did receive dividends and didn't report them, you'll probably need to accept that part of the adjustment. But for the self-employment tax issue, you definitely have grounds to dispute this if your stipend is truly a fellowship/scholarship payment. Here's what I'd recommend: First, gather your stipend award letter from your university that clearly states the nature of the payment (fellowship vs. compensation for teaching). Second, if you have both research and teaching components, get clarification from your department about what percentage is fellowship vs. teaching assistantship, since they're taxed differently. Third, respond to the CP2000 by the deadline with a clear written explanation and all supporting documentation. The good news is that if you can demonstrate your stipend qualifies as a scholarship/fellowship payment, the IRS will typically reverse the self-employment tax portion. Don't panic - this is actually a pretty common issue that gets resolved once you provide the proper documentation!