An official website of the United States Government (NON-Prod - Development Environment)It’s important that your tax return accounts for all the income you have for that year. Remember, income isn’t necessarily just the money you make from your job — it’s also things like freelance income, interest, dividends, settlements, sale of property, and many other sources – See Gig Economy Tax Center.
The IRS has a variety of ways to verify the income taxpayers report on their returns. Most businesses and organizations are required to file “information returns” with the IRS, — IRS Forms W-2, IRS Forms 1099, and others — when they “pay” you. The IRS matches the information on these information returns to your tax return. If they do not match, you will get a notice asking about the difference.
Keeping track of information returns is helpful for knowing the income you should report (See the Resources, section for a list of common information returns).
There are other kinds of income, like tips or cash income, that may be taxable, but don’t require an informational return to be filed. In those cases, it’s your responsibility to track and accurately report the income.
Keep accurate and complete records of your income throughout the year as you earn it.
Otherwise, you may have to file an amended return.
That you get from your employer, mortgage company, bank, or other sources of income (IRS Forms W-2, 1098, 1099, etc.) to make sure they’re correct.
A complete list of taxable and non-taxable income is available in Publication 525, Taxable and Non-Taxable Income.
If you receive a notice that your tax return doesn’t match the income or payment information the IRS has on file, you should:
If you receive a notice that your income was underreported or overreported, it could affect your tax return. It may cause an increase or decrease in your tax liability or may not change it at all.
If your tax liability increases and you now owe money, it is to your benefit to pay the balance as soon as possible, because the IRS charges interest until you pay the balance in full. However, if you can’t pay in full, there may be other options.
Again, don’t delay your response, as interest, and perhaps penalties will continue to accrue until you pay the balance in full.
Browse common tax issues and situations at Get Help.
If your IRS problem is causing you financial hardship, you’ve tried repeatedly and aren’t receiving a response from the IRS, or you feel your rights are not being respected, consider contacting Taxpayer Advocate Service (TAS).
You may be eligible for representation from an attorney, certified public accountant (CPA), or enrolled agent (EA) associated with a Low Income Taxpayer Clinic (LITC). LITCs may also provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language.
Instead of just a notice that says I have a discrepancy in income reported, I received a notice that says I’m under audit. If you get a notice that your federal tax return is being audited, see Audits by Mail or Audits in Person for more information on what to do.
Some common information returns are:
Tax Topic 652
Tax Topic 652 – Notice of Underreported Income – CP2000
Read the Tax TopicTax Topic 400
Tax Topic 400 – Types of Income
Read the Tax TopicUnderstanding your CP 2000 Notice
Small Business and Self Employed
Small Business and Self Employed – What is Taxable & Nontaxable Income
Read more