A letter from the IRS: CP2000, Letter 5071C and what to do from India

An IRS letter is stressful, but most of them are routine, and the deadline is the part that matters. Two letters turn up repeatedly for NRIs: the CP2000, about numbers that do not match, and Letter 5071C, about identity.

First, check that it is real

The IRS starts contact by mail. A phone call or message that demands immediate payment, threatens arrest or deportation, or asks for gift cards, wire transfers or cryptocurrency is not the IRS. These scams are common and often target immigrant communities. The notice number is printed at the top right of a real letter. If a letter looks wrong, do not use a phone number or link from an email. Use the number printed on the letter, or find the IRS contact details from IRS.gov.

CP2000: the numbers do not match

A CP2000 says that income or payment information the IRS received from third parties, such as an employer, broker or bank, does not match your return. It proposes a change in your tax, which could be an increase, a decrease or no change. It is not a bill, but you must respond by the date on the notice.

Common triggers for NRI returns:

• Stock sales where the broker reported the wrong basis, or reported no basis at all. This is the most common cause for people with RSUs and ESPP shares, because the 1099-B shows zero basis and the return is correct. See equity compensation.
• A 1099 for interest or dividends that was missed or was reported on the wrong return.
• A form for a different year or for a taxpayer with a similar number.

How to respond:

1. Compare each line of the notice with your return and your records.
2. If you agree, complete the response form, sign it and return it. If the notice is right and you have other items to report, file Form 1040-X with "CP2000" written at the top.
3. If you disagree in whole or part, complete the form, say so, and attach the documents that prove it, such as a basis statement from your stock plan.
4. Reply by upload, fax or mail, using the method on the notice. If you need more time, send an extension request before the deadline.

If you do nothing, the IRS may send another notice and a bill, and interest and penalties may follow.

Letter 5071C: confirm that you filed

This letter says the IRS has held a return, and possibly a refund, until you confirm your identity. It is a check against identity theft, not an accusation. You verify through the IRS identity verification website named in the letter, or by calling the number on the letter. The Taxpayer Advocate Service advises responding within 30 days, and you will need the letter and a copy of the return for the year it names. Nothing moves until you do it.

From abroad the online route can be difficult if it asks for a US phone number or documents you do not have. The letter and the IRS give alternatives, including the phone line and an in-person appointment. Do not ignore a 5071C because it seems hard. The refund waits.

Letters you never see

The IRS mails to the address on your return. Many NRIs file in March, move in June and miss the notice in October. To avoid it:

• File Form 8822 when your address changes, or keep a US address you can rely on.
• Appoint your preparer with Form 2848, so that the CPA receives copies and can respond for you.
• Check your IRS online account from time to time for notices and balances.
• Keep the year's records at least until the period for the IRS to assess the tax ends. For most returns that is three years, but it is longer where income was omitted or foreign forms were not filed.

What not to do

• Do not pay a demand you do not understand. Compare it with your records first.
• Do not ignore a notice because you have left the US. The deadline runs.
• Do not reply with only a note. The response form and the supporting documents are what the reviewer reads.

If the notice mentions foreign accounts, assets or a penalty, get professional help before you answer.