📬 Got a CP2000 from the IRS? Don’t panic.

A CP2000 looks scary, it’s printed on official letterhead, it has a number that sounds like a robot, and somewhere on the second page, it usually mentions a dollar amount you’d rather not pay. But it is not, technically, a bill. And it is definitely not an audit.

A CP2000 is the IRS’s polite way of saying, “Our records and your return don’t match. Care to explain?”

The IRS receives copies of every W-2, 1099, 1098, and brokerage statement issued in your name. Their computers compare those documents to what you reported on your return. When something doesn’t line up, like a forgotten 1099 from a side gig, missing interest income from an old savings account, a mystery brokerage form you didn’t know existed, the system spits out a CP2000.

It’s a math problem, not a moral judgment. No human at the IRS has personally reviewed your return and decided you’re suspicious. A computer flagged it.

Three things to do, in order:

If they’re right: Sign the response form, pay the amount (or set up a payment plan), and you’re done. The matter closes.

If they’re wrong: Write back with documentation explaining the discrepancy. Be specific, be calm, attach copies of whatever proves your case. Most CP2000 disputes are resolved through the mail without anyone ever speaking on the phone.

A CP2000 is annoying and occasionally expensive. It is not the beginning of an audit, and it is not a sign that the IRS thinks you’re a criminal. It’s a mismatch notice. Handle it within 30 days and it stays a mismatch notice.

No. You do not.

This is one of the most persistent myths in small business, and it costs people real money, both in unnecessary filing fees and in deductions they don’t take because they think they’re not “official” enough to claim them.

If you earn money from a business activity, you can deduct the ordinary and necessary expenses of running that business. The IRS doesn’t care what legal structure you’ve wrapped around it. A freelance writer with no LLC, no EIN, and no business cards can deduct her laptop, her home office, and her mileage to client meetings just as easily as a software company with a fancy operating agreement.

The deduction is on Schedule C, attached to your regular Form 1040. That’s it. No LLC required.

LLCs are useful for other reasons, like liability protection, professional credibility, and separating personal and business assets. Those are real benefits. But a lot of people conflate “legal protection” with “tax deductions,” and assume that without the LLC, the IRS won’t let them write anything off.

It’s understandable. The word “business” sounds like it should require paperwork. It doesn’t.

What you actually need to deduct expenses:

If you have employees, significant assets, real liability exposure, or you’re working with clients who expect to see “LLC” on the contract, then sure, form one. There are good reasons.

But “I want to write off my business expenses” is not one of them. You already can.

Sole proprietors deduct business expenses every single tax season, billions of dollars’ worth, without ever filing for an LLC. Keep good records, file Schedule C, and you’re set.

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If you own a business (or you’re building one), this one’s for you.

Possibly not. The tax code, in a rare burst of generosity, lets most homeowners walk away from a home sale without paying a dime in capital gains tax, even on substantial profits.

The rule is called the Section 121 exclusion, and it’s one of the more genuinely useful provisions in the code.

How much can you exclude?

If you’re single, you can exclude up to $250,000 of profit from the sale of your primary residence. If you’re married filing jointly, that doubles to $500,000.

To qualify, you need to have owned the home and used it as your primary residence for at least two of the last five years. Those two years don’t have to be consecutive. They just have to add up.

A quick example:

You bought your house for $300,000. You sold it for $700,000. Your profit is $400,000.

If you’re married filing jointly, your $500,000 exclusion swallows that $400,000 whole. You owe nothing in capital gains tax on the sale.

If you’re single, your exclusion only covers the first $250,000 of that profit. The remaining $150,000 would be taxed at long-term capital gains rates, usually 15%, sometimes 20% depending on your income.

Profit isn’t just sale price minus purchase price. You can add the cost of certain improvements — a new roof, a kitchen remodel, an addition — to your original cost basis. That lowers your taxable profit.

Routine repairs don’t count. A new water heater is maintenance. A finished basement is an improvement. The distinction matters.

You can only use the exclusion once every two years. If you’ve sold another primary residence in the last 24 months and used the exclusion then, you can’t use it again now.

If the home was a rental at any point, things get more complicated. Depreciation recapture enters the picture, and the math gets uglier.

Most homeowners selling a primary residence they’ve actually lived in for a couple of years owe nothing on the sale. If your profit is approaching the limits, or if the property has any rental history, talk to a tax pro before closing. Otherwise, congratulations, that’s tax-free money in your pocket.