What to Do About an IRS CP2000 Letter as a Reseller

A CP2000 notice means the IRS thinks your tax return doesn't match information they received from third parties -- usually a 1099-K from eBay, Poshmark, or another platform. Don't panic. Here's exactly what to do.

Last verified: January 2026. Always consult a tax professional for advice specific to your situation.

What is a CP2000 notice?

A CP2000 is an automated notice from the IRS. It is notan audit. The IRS computer compared the income reported on your tax return to the income reported to them by third parties (platforms, banks, employers). When the numbers don't match, it sends a CP2000 proposing additional tax.

For resellers, this almost always happens because a 1099-K reports your gross sales, but you reported your net profit (after deducting costs). The IRS computer sees the difference and assumes you forgot to report income.

Step 1: Don't ignore it

You typically have 30 days to respond. If you ignore it, the IRS will assume their proposed changes are correct and send you a bill for the additional tax, plus interest and penalties.

Step 2: Check if the 1099-K amount is correct

Log into your marketplace account and verify the gross sales figure matches the 1099-K. If it's wrong, contact the platform to issue a corrected form.

Step 3: Prepare your reconciliation

The key to responding is showing the IRS that you did report the income -- you just also deducted legitimate business expenses. You need a clear breakdown:

• Gross receipts (should match or be close to your 1099-K amount)
• Cost of goods sold (what you paid for the items you sold)
• Platform fees (eBay ~13%, Poshmark 20%, etc.)
• Shipping costs paid out of pocket
• Other expenses (supplies, mileage at $0.70/mile for 2026, storage, etc.)
• Net profit = gross - all of the above

This is essentially your Schedule C. If you filed one correctly, you can reference it in your response.

Step 4: Write your response

The CP2000 includes a response form. Check the box that says you disagree (partially or fully) and attach:

1. A letter explaining that the 1099-K gross was reported on Schedule C Line 1, and that you deducted COGS and expenses on the appropriate lines
2. Your 1099-K reconciliation showing how gross breaks down to net profit
3. Supporting documentation (receipts, spreadsheet, Soldbook Tax-Ready Report)

Step 5: If you made a mistake

If you actually did underreport income (maybe you forgot to include a platform, or you didn't file a Schedule C at all), it may be better to agree with the CP2000 or file an amended return. Consider consulting a CPA or enrolled agent.

How to prevent CP2000 notices

The best defense is reporting your gross receipts on Schedule C Line 1 to match (or closely match) your 1099-K amounts. Then deduct your costs on the appropriate lines. When the IRS computer sees that Line 1 matches the 1099-K, it won't flag a discrepancy.

Soldbook's Tax-Ready Report generates this reconciliation automatically: per-platform gross vs. computed net, mapped to Schedule C lines. It's specifically designed to prevent CP2000 notices.

Informational only — not tax advice.