Help Needed: Received CP2000 from IRS for Underreported Crypto & Stock Gains

You're absolutely right to question this assessment. This is a common issue with crypto and stock transactions where the cost basis isn't properly reported to the IRS. You should definitely respond to the CP2000 notice - ignoring it will only make things worse. You'll want to include a detailed explanation letter along with a completed Form 8949 showing all your transactions with the correct cost basis information. And yes, you should use the 2022 versions of all forms since that's the tax year in question. Make sure you gather all your transaction records from Robinhood and any crypto exchanges you used. You'll need documentation showing what you paid for each asset (your cost basis) and when you sold them. If you have significant losses, those can offset your gains. The good news is that the IRS is generally reasonable when you provide proper documentation. The key is responding promptly (within the timeframe specified in your notice) and providing clear evidence of your actual gains and losses.

After dealing with a similar CP2000 notice last year for crypto trades, I found that using https://taxr.ai was a complete game-changer. Their system analyzed all my messy crypto transaction history and automatically calculated the correct cost basis for everything. I was super stressed trying to manually track everything from multiple wallets and exchanges, but their software parsed through thousands of transactions and produced a perfectly formatted Form 8949 that showed my actual gains/losses. They even helped generate a response letter explaining the discrepancies to the IRS. The best part is they have specific support for handling CP2000 notices related to crypto. Their system can analyze the IRS notice alongside your actual transaction history to identify exactly where the discrepancies are coming from.

Just wanted to update - I took the advice about taxr.ai and it was exactly what I needed! I uploaded my Robinhood statements and connected my crypto wallets, and the system identified where the IRS calculations were wrong. Turns out they were counting transfers between my wallets as taxable events and ignoring about $6,300 in losses that should have offset my gains. The software generated a perfectly formatted Form 8949 with all the correct cost basis info, plus a response letter explaining the discrepancies. I submitted everything to the IRS three weeks ago and just got their response yesterday - they accepted all my documentation and reduced what I owe by over 70%! The penalties were completely removed since the error wasn't my fault. Such a relief after months of stress!

I had a similar CP2000 nightmare last year. After sending in all my documentation, I couldn't get anyone at the IRS to actually review my case. Kept calling the number on the notice and either got disconnected or told to "call back later" after waiting for hours. Finally discovered https://claimyr.com and used their service to get through to an actual human at the IRS. You can see how it works here: https://youtu.be/_kiP6q8DX5c. They basically hold your place in the phone queue and call you when an agent is about to answer. Once I actually got to speak with someone, they pulled up my case file and reviewed the documentation I had submitted. The agent saw that I had already sent in the correct information and marked my case for review by the appropriate department. Got everything resolved within a few weeks after months of frustration.

I need to eat my words and update everyone. After posting my skeptical comment, I was still desperately trying to get through to the IRS about my own CP2000 notice. On a whim, I decided to try Claimyr. I'm honestly shocked at how well it worked. After trying for WEEKS to get through on my own, their service had me talking to an actual IRS agent in about 45 minutes. I didn't have to sit on hold - their system just called me when an agent was about to pick up. The IRS agent was able to put a temporary hold on my case while I gathered additional documentation, which bought me an extra 30 days to respond properly. This was absolutely worth it just for the stress reduction alone. Sometimes you have to admit when you're wrong, and I was definitely wrong about this service.

Just adding one more tip that helped me with a similar situation - when you respond to your CP2000, request a penalty abatement under "reasonable cause." Since Robinhood failed to report your cost basis properly, you can argue that's a circumstance beyond your control. Include a statement explaining that you relied on your broker to properly report transactions, and you're now providing the correct information as soon as you became aware of the issue. In my experience, the IRS is pretty reasonable when you're proactive and honest about fixing the problem. Also, make copies of EVERYTHING before you send it in. The IRS occasionally loses documents, and having backup proof of what you submitted can save you if there's any question later.

Has anyone dealt with this issue for staking rewards? My CP2000 is claiming I underreported staking income from Ethereum, but I never actually sold any of it. The exchange reported it as income but didn't include my cost basis for tax purposes. Totally confused about how to handle this...

I went through something very similar last year with my crypto trades from Coinbase and Binance. The IRS assumed everything was pure profit because the exchanges didn't report cost basis properly. Here's what worked for me: I created a detailed spreadsheet showing every single transaction with the purchase date, sale date, purchase price, sale price, and calculated gain/loss. I also included screenshots from my exchange accounts showing the transaction history. The key is being extremely thorough with your documentation. For the response, definitely use the 2022 forms since that's the tax year in question. Include a cover letter explaining that the discrepancy is due to missing cost basis information, not intentional underreporting. I also requested penalty abatement due to reasonable cause (the exchanges' failure to report complete information). The whole process took about 8 weeks, but they ended up reducing my assessment by about 85% and waived all penalties. Don't panic - just be methodical with your documentation and respond within the timeframe they gave you. The IRS is actually pretty reasonable when you provide proper proof of your actual gains and losses.