By Pedro Bianco
En esta noticia
Many taxpayers think a small amount of income “won’t be noticed” or that the Internal Revenue Service has no way of finding out. In fact, the opposite is true: the agency gets copies of a large share of each person’s income even before they file their return, and it cross-checks that information automatically. When the numbers don’t match, the system flags it and sends a notice demanding the difference.
The IRS Has Copies of Everyone’s Income and Automatically Cross-Checks It Against Tax Returns
The IRS does not rely only on what each person reports. Third parties — whether employers, banks, platforms or other payers — are required to report the payments they make and send the IRS copies of the corresponding forms: the W-2 for wages, the various 1099 forms for independent work, bank interest, investments and other income. In other words, before the person files a return, the agency already has a record of much of what they earned.
To compare that information, the IRS uses an automated system called Automated Underreporter (AUR). That program compares what the taxpayer reported with what third parties reported. When it finds a difference — for example, income listed on a 1099 but not on the return — the case is flagged, and an examiner reviews it before any notice is issued. That means what many assume is “invisible” is exposed as soon as there is a form documenting that income.
How It Seeks the Difference When It Detects Unreported Income
The result of that cross-check, when there is a discrepancy, is a notice known as a CP2000. This is not a formal audit, but a proposed adjustment. The notice shows the taxpayer what they reported, what the third party reported and the change the IRS is proposing, which could mean more tax due — or, in some cases, even a refund. It is not an automatic penalty or a final bill, but a proposal that must be responded to.
Even though it is not an audit, the CP2000 has real consequences. If more tax is owed, interest is added, calculated from the original filing deadline and continuing until the debt is paid; penalties may also apply. The taxpayer generally has 30 days from the date of the notice to respond. If they do not respond, the IRS moves ahead with a formal notice of deficiency, a more serious step in the collection process.