CP 2501 Notice
Why did I receive the CP 2501 notice?
This notice is sent when the IRS doesn't agree with the income or deductions you reported on your return. They compare information filed by companies on forms W-2, 1098, 1099, etc. with your return. They mail a notice if there are differences.
How do I know if the changes are correct?
Review the column marked Shown on return and compare it with the column marked Reported to IRS by others. Did you receive the income? If you received the income, was it reported on your tax return? IRS employees search the tax return and try to locate all income. However, sometimes several income items are combined and the employees can't determine the source. If it wasn't reported on your tax return, was it an oversight?
Common IRS mistakes
Don't automatically agree with the changes the IRS made. Common IRS errors include:
If you disagree with their changes, it's important to respond by the due date on the notice. Otherwise, they'll assume the proposed changes are correct.
For additional information, click on any of the topics below.
What to do if you disagree with the IRS tax notice
Getting rid of tax penalties
What to do if you do not have the money to pay the IRS
This notice is sent when the IRS doesn't agree with the income or deductions you reported on your return. They compare information filed by companies on forms W-2, 1098, 1099, etc. with your return. They mail a notice if there are differences.
How do I know if the changes are correct?
Review the column marked Shown on return and compare it with the column marked Reported to IRS by others. Did you receive the income? If you received the income, was it reported on your tax return? IRS employees search the tax return and try to locate all income. However, sometimes several income items are combined and the employees can't determine the source. If it wasn't reported on your tax return, was it an oversight?
Common IRS mistakes
Don't automatically agree with the changes the IRS made. Common IRS errors include:
- Stock sales - If you didn't report a stock sale, they only have the 1099-B with the total sales and no cost basis. They'll assume the full amount is taxable without considering your basis. For example, if you sold 1,000 shares of XYZ company for $15,000 and you purchased the shares 5 years ago for $10,000, they'll say you have a $15,000 capital gain. But you really only have a $5,000 when you factor in the $10,000 cost basis. That's a $10,000 difference in capital gain income.
- 1099-NEC or 1099-MISC - If you forgot to enter a Form 1099-NEC or Form 1099-MISC on a Schedule C with your return, they'll claim the full amount of the 1099-NEC or 1099-MISC as taxable without expenses to reduce the amount of taxable income.
- Tax Exempt Interest - Sometimes they'll say tax-exempt investment income from a Form 1099 is taxable. Just let them know the investment income is from a tax-exempt account. For example, if they say interest income from your 401(k) account is taxable, you should tell them the interest income is coming from a tax-exempt 401(k) account.
- Income Doesn't Belong to You - Their system processes millions of W-2 and 1099 forms and it does make mistakes. If a W-2 or 1099 was incorrectly assigned to you, just explain that it does not belong to you.
- Income is Double Counted - If their system double counts a W-2 or 1099, you just need to explain that your income was counted twice.
If you disagree with their changes, it's important to respond by the due date on the notice. Otherwise, they'll assume the proposed changes are correct.
For additional information, click on any of the topics below.
What to do if you disagree with the IRS tax notice
Getting rid of tax penalties
What to do if you do not have the money to pay the IRS
