01A CP2000 says information reported by a third party — for digital assets, usually Form 1099-DA from a broker — does not match your return, and proposes additional tax on the difference.02It requires a response. If you do not respond by the response date, IRS guidance says the case can move to a Statutory Notice of Deficiency.03IRS guidance says to respond within 30 days of the notice date, or within 60 days if you live outside the United States. Use the date and response instructions printed on your notice.
What a CP2000 is, and is not
A CP2000 is an Automated Underreporter notice proposing changes where third-party information does not match the return. It is not itself an audit or a bill. If you agree, the notice provides a response form; if you do not respond by the response date, IRS guidance says the process can move to a Statutory Notice of Deficiency. The notice you actually received controls the response date and channel.
That second path is the one to avoid by accident. Most bad outcomes from a CP2000 are not caused by the tax; they are caused by the calendar.
Why the proposed number is usually wrong for crypto
The matching system compares information returns with the return you filed. Form 1099-DA reports proceeds, while basis reporting depends on whether the asset is a covered security and whether the broker is required to report that basis. Transferred-in assets are generally noncovered for broker basis-reporting purposes, so the information available to matching can be incomplete.
Missing broker basis can make the proposed difference look much larger than the economic gain
If the broker did not report basis, a mismatch can arise unless your return and supporting records supply the correct tax-basis treatment. The CP2000 itself is a proposal: reconcile the notice line by line rather than assuming its proposed amount is final.
This is also why "just pay it to make it go away" is the single most expensive instinct with this letter.
What to do this week
- Find the date and response deadline on the notice. IRS guidance says 30 days, or 60 days if you live outside the United States. Write the printed response date down before anything else. If it is close, contact the IRS or a representative rather than assuming extra time.
- Do not sign an agreement before checking the proposed changes. An agreement is consequential; review the figures and the notice instructions before signing.
- Reconstruct basis for every transaction the notice lists. Match each line to an acquisition: date, amount paid, and the record that proves it. The output is a corrected Form 8949 with an explanation.
- Decide whether the notice touches years the IRS has not asked about. If reconstructing basis exposes earlier unreported activity, stop. A CP2000 response is a signed statement, and it can be used. Read Amend, quiet disclosure, or voluntary disclosure before sending anything — the sequence of what you send matters more than the content.
- Use an IRS-listed response channel and keep a complete copy. Current IRS guidance permits the Document Upload Tool, fax or mail; follow the instructions on your notice.
What the notice is asking you to decide
| Situation | Primary task | Do not assume |
|---|---|---|
| You agree with the proposed change | Follow the agreement/payment instructions on the notice. | That every other year or transaction is resolved. |
| You disagree because basis or transaction facts are missing | Reconcile each line and send the documentation through a response channel listed by the IRS/notice. | That a broker-reported proceeds figure establishes taxable gain by itself. |
| The work uncovers unreported activity in other years | Separate the CP2000 response from the broader correction/disclosure analysis. | That the safest sequence is automatically to amend everything immediately. |
| You already have a Statutory Notice of Deficiency | Use the deadline and rights on that notice; the CP2000 response stage is no longer the only clock. | That the CP2000 timing rules are still the relevant deadline. |
Four facts can change the next step
- Whether you live outside the United States for the CP2000 response rule.
- The exact notice revision, response date and channel printed on your document.
- Whether the disagreement is only basis/reconciliation or also exposes omitted transactions or years.
- Whether the case has already advanced to CP3219A or another examination/collection process.
When to bring in a representative
Bring one in immediately if any of the following is true: the proposed amount is large relative to what you can document; more than one year is involved; you did not report the activity at all; you have received any other letter (6173, 2205-A) in the same period; or the deadline is inside two weeks. An Enrolled Agent or tax attorney can obtain your transcripts, request time, and respond without turning the reply into an admission.
If none of those apply and your records are complete, a well-documented self-response is realistic. The reconciliation file you build for it is also the file that prevents the next CP2000.
Primary authority checked 31 Aug 2026: IRS Topic 652 and Understanding your CP2000 series notice. If you have received this letter, a response deadline applies. This page explains the notice; it does not respond to it, and reading it creates no professional relationship.