It looks like a bill for $40,000. It is a computer asking a question

Figures relate to tax year 2025-26 (UK) · 2025 (US)

An envelope arrives with a proposed balance of tens of thousands of dollars. There is a payment slip at the bottom and a deadline near the top.

Nobody has audited you. No human has looked at your return at all.

A CP2000 notice is a computer saying that a number it holds does not match a number you filed. For expatriates it is usually right about the mismatch and badly wrong about the tax.

Key takeaways

• A CP2000 notice proposes a change rather than demanding payment.
• A machine generated it by matching third party data.
• The commonest expat cause is missing cost basis on share sales.
• You have thirty days from the date on the letter, not from receipt.
• Responding is not amending, and amending confuses the CP2000 notice.
• Ignoring it turns the proposal into an assessment after ninety days.
• Interest runs from the original due date whatever the outcome.

What is a CP2000 notice?

An automated letter proposing changes to a return, produced where information from banks, brokers and employers fails to match what you reported. According to IRS guidance on the notice, it is a proposal rather than a bill, and no examination has taken place.

The programme behind it matches millions of returns every year.

Nobody reviews your particular facts until you reply.

Why do expats get so many?

Because the data the IRS holds covers American payers only, while your return reports a life lived elsewhere. Reliefs that remove foreign income, treaty positions and foreign tax credits all look like discrepancies to a matching programme. It sees a gap and writes to you.

British salary generates no American paperwork at all, so it rarely triggers one.

What triggers them is the American account you left behind.

A worked example

Take an illustrative example. An American in Bath kept a brokerage account in Chicago and sold $180,000 of shares during 2023.

The broker reported gross proceeds of $180,000 and no cost basis, because the shares moved from an older account years ago.

She reported a $12,000 gain correctly. The matching programme compared $180,000 against her figures and proposed tax on the lot.

The proposed balance exceeded $50,000. Her actual additional liability, once she sent the purchase contracts, was nothing at all.

What the letter is and is not

What is the zero basis trap?

Brokers report what you sold, and sometimes what you paid. Where the purchase history is missing, the proceeds arrive with no cost attached. The matching programme then treats the entire sale price as gain, which turns a modest profit into an enormous proposal.

Transferred accounts and inherited shares cause most of these.

The fix is documentary rather than legal: send the purchase evidence.

How long do you really have?

Thirty days from the date printed on the notice, which is not the date it reaches Britain. International post routinely takes two weeks, so a third of the window can vanish before you open the envelope. Posts to a stale American address can consume all of it.

Our guide to requesting transcripts from abroad covers updating your address.

Call or fax to request more time rather than missing the date.

What happens if the deadline passes?

The proposal hardens into a statutory notice of deficiency, which carries its own ninety day clock. After that the IRS assesses the tax and collection begins. Your options narrow at every stage, and after assessment they narrow sharply.

The ninety day letter is the last chance to go to Tax Court without paying first.

Audit reconsideration exists afterwards but is slower and less certain.

Should you amend your return instead?

No, and this is the commonest mistake we see. An amended return filed in response does not answer the notice, so the clock keeps running while the amendment sits in a separate queue. Two processes then run past each other.

Our guide to amending a US return explains when amendment is right.

Respond on the notice's own response form instead.

How do you actually reply?

Complete the response page saying whether you agree, partly agree or disagree, then attach a short explanation and the documents that prove it. Send it by the route the notice specifies. Keep proof of what you sent and when.

Fax is usually faster and gives a transmission receipt.

International post leaves you with nothing to point at later.

What should the explanation say?

One page, plain language, in the order the notice raises its points. Name each proposed change, say why it is wrong, and reference the attached document that shows it. Avoid arguing about anything the notice did not raise.

A clear single page beats a folder of unsorted statements.

In our practice the shortest responses get resolved fastest.

What if some of it is right?

Agree with that part and dispute the rest, which the response form allows explicitly. Partial agreement is normal and does not weaken your position on the other items. It also stops interest building on the part you genuinely owe.

Pay the agreed portion when you reply if you can.

Our guide to IRS payment plans from abroad covers paying over time.

Does a foreign tax credit explain most of them?

Often, because the proposal recomputes your tax without reapplying the credit you claimed. Additional American source income can also change the credit limitation itself. Your reply needs to show the corrected credit, not merely dispute the income.

Our guide to the Form 1116 income baskets covers the limitation.

Recomputing the whole return is usually necessary rather than optional.

What about pension and social security income?

American pension payers and the social security administration both report what they paid you. Where a treaty position reduced what you reported, the match fails and a notice follows. The position itself is often correct.

Your reply explains the treaty article relied on and points to any disclosure filed.

Keep that disclosure with the return rather than filing it loose.

Can an accountant respond for you?

Yes, with a signed authorisation on file. A representative can call the dedicated line, request extra time and submit the response. From Britain that speed matters more than it would domestically.

Our guide to IRS online access from Britain covers the authorisation forms.

File the authorisation at the same time as the response, not afterwards.

Does interest run even if you win?

On whatever you genuinely owed, yes, calculated from the original due date rather than from the notice. For 2025 the underpayment rate stood at 7 per cent, compounded daily. Winning the main argument still leaves interest on any agreed part.

That is why paying the agreed portion early is worth doing.

Interest on an amount you did not owe disappears with the proposal.

Can penalties be removed?

Frequently, where the understatement came from a genuine mistake rather than carelessness. An accuracy penalty often accompanies a proposal and falls away when the proposal does. Where some tax stands, reasonable cause can still remove the penalty.

Our guide to reasonable cause penalty relief covers the standard.

Ask for removal explicitly rather than hoping it happens.

How long does resolution take?

Three to six months is normal once a response goes in, and longer where the service centre has a backlog. You may receive a further letter acknowledging receipt and nothing else for months. Silence at that stage is ordinary.

Chase after four months rather than four weeks.

Keep the fax receipt, because proving you replied is the whole battle.

Will it happen again next year?

It will if the underlying cause persists. An account reporting proceeds without basis will do the same thing every year you sell. Fixing the basis records with the broker stops the cycle at source.

Ask the broker to update the cost basis on transferred holdings.

That one call saves several years of correspondence.

Does it affect a streamlined filing?

It can close the door, because the catch up programme requires that the IRS has not already contacted you about those years. A notice covering a year you planned to disclose changes the route available. Check the years carefully before filing anything.

Our guide to delinquent information returns covers the alternatives.

Timing decides which options remain open to you.

Does a CP2000 notice mean you are being audited?

No, and the distinction matters for your nerves as much as your rights. An audit involves an examiner looking at your books. This is a data matching exercise with nobody assigned to it until you reply. Most resolve on paper without anybody ever speaking to you.

It does not raise your odds of a real audit later either.

Treat it as correspondence rather than as an investigation.

What if the income genuinely is not yours?

Identity theft and simple payer errors both happen, so say so plainly and ask the payer for a corrected form. A CP2000 notice built on somebody else data collapses once the payer confirms the mistake.

Our guide to the identity protection PIN covers preventing the theft version.

Report suspected theft separately rather than only in the reply.

Does it cover more than one year?

Each notice deals with a single tax year, though several can arrive together where a problem repeated. Answer each one separately, because they run on their own clocks and reach different service centres.

A shared explanation can be attached to each reply.

Never assume answering one settles the others.

Can you see the notice online?

Recent notices appear in your online account, which solves the postal delay neatly. Seeing a CP2000 notice the week it issues rather than a month later can hand you back half the response window.

That alone justifies getting through the identity checks.

Older correspondence may not appear, so keep whatever paper you have.

What does it cost to deal with?

Usually a few hours of professional time, which is small against a proposal running into five figures. The work is gathering evidence and recomputing the year rather than arguing law.

Complex years with credits and treaty positions take longer.

Either way it costs far less than paying a wrong proposal.

What triggers one on a UK pension?

Nothing directly, because a British provider files nothing with the IRS. What does trigger them is an American payer reporting a rollover, a distribution or an annuity you treated under the treaty. The matching programme sees the payer form and not your reasoning.

So the reply explains the treaty article and attaches the disclosure you filed.

Keeping that disclosure with the return makes this a five minute answer.

Does the notice ever understate what you owe?

Occasionally, because it only looks at the items that failed to match. Other errors in the same return stay invisible to it. Agreeing to the proposal does not close the year or stop a later look at something else.

Equally, a correct return with one mismatched item is still a correct return.

Fix anything you spot while you have the year open in front of you.

Is a phone call worth making?

For an extension of time, yes, since that can be granted on the spot. For the substance, no. Telephone explanations leave no record and the person answering cannot see your documents.

Call to buy time, then put the real answer in writing.

Note the date, the time and the badge number of whoever you speak to.

What if you have moved since filing?

The notice goes to the address the IRS holds, which for many expatriates is a house they left years ago. Updating it is a separate short form and takes several weeks to process.

Do it now rather than when a notice is already in the post.

A relative forwarding mail monthly is not a substitute for the thirty day clock.

Should you reply even if you agree?

Always, because silence is not consent in a useful way. Signing and returning the agreement page stops further letters, fixes the amount and lets you arrange payment. Saying nothing simply waits out the clock and produces a harsher notice instead.

Agreeing also lets you ask for the penalty to come off at the same time.

That request is far easier to make before assessment than after it, and the officer reading your reply has the discretion to grant it.

What records should you keep?

Keep the notice itself, your complete response, the transmission receipt, and every document you attached. Together they prove both that you replied and what you said, which is what any later dispute turns on.

Scan everything the day you send it.

Keep the file for at least six years after resolution.

How to respond to a CP2000 notice

1. Note the response date printed on the CP2000 notice immediately.
2. Read which specific items the IRS says do not match.
3. Gather the documents that prove your reported figures.
4. Recompute the return including any credit that changes.
5. Complete the response page, agreeing in part if appropriate.
6. Write one page explaining each disputed item in order.
7. Fax the reply and keep the transmission receipt.
8. Diarise a chase for four months after sending.

Mistakes and penalties we see with a CP2000 notice

The first is paying it. Many proposals are wrong, and paying ends the argument.

The second is amending instead of responding, which leaves the clock running.

The third is ignoring it because the figure looks absurd. Absurd figures become assessments after ninety days.

The fourth is replying by ordinary post from Britain with no proof of sending.

How US UK Tax Accountants helps

We read the notice against the filed return and work out in an hour whether the proposal has any merit. Most of the ones we see do not.

Then we recompute the year properly and send a response that answers each point with evidence. Our US federal returns service covers the corrected filings.

If a notice has arrived and the date is close, get in touch today rather than next week.

Last reviewed 18 October 2026. This article is general information and not personal tax advice. Notices turn on their own facts, so take advice on yours.