Introduction

The IRS receives millions of information returns (W‑2s, 1099s, 1099‑K, 1098, etc.) from employers, banks, and payers each year and uses automated systems to compare that third‑party data with what taxpayers report. When figures don’t line up, the IRS’s information‑matching and Automated Underreporter (AUR) processes flag the return and may generate a notice proposing additional tax, a math correction, or a request for more information (for example, a CP2000 notice). (IRS information returns and CP2000 overview: https://www.irs.gov/credits-deductions/cp2000-notice; IRS info returns: https://www.irs.gov/filing/information-returns)

How the matching process works

  • Data intake: Employers and payers file information returns electronically or on paper; the IRS captures those records into its database.
  • Computer comparison: Automated systems run matches between reported income/credits and the IRS’s information‑return records.
  • Thresholds and rules: Small or explainable variances are often ignored; larger or material mismatches are routed for review and can trigger a notice.
  • Notice generation: The AUR program or related units typically issue a CP2000 (proposed changes) or other notices. You’ll get clear instructions and a deadline to respond. (See CP2000: https://www.irs.gov/credits-deductions/cp2000-notice)

Common triggers that lead to an inquiry

  • Unreported or underreported income: Missing wages, 1099‑NEC, 1099‑MISC, 1099‑K, or interest/dividend amounts.
  • Mismatched Social Security number or name: If payer forms list a different SSN or name, the records won’t match.
  • Duplicate or multiple information returns: Multiple payers reporting the same income or duplicate forms from the same payer.
  • Incorrect filing status or dependency claims: Automated checks can flag unusual credits or exemptions.
  • Math errors and calculation mismatches: Systems detect arithmetic problems and omitted schedules.
  • Payer reporting errors: Sometimes the payer sent the wrong amount or filed an incorrect form. (For payer correction guidance, see how to correct W‑2/1099 errors: https://finhelp.io/glossary/how-to-correct-w-2-or-1099-errors-with-an-amended-return/)

Who is most likely to be affected

Taxpayers with multiple income sources—freelancers, gig workers, contractors, small‑business owners, and households receiving many 1099s—are statistically more likely to see mismatches. Complex returns that include business income, rental income, or numerous credits also raise matching activity.

What to do if you receive a notice

  1. Read the notice carefully and note the deadline. CP2000 typically gives about 30 days to respond. (IRS CP2000 page: https://www.irs.gov/credits-deductions/cp2000-notice)
  2. Compare the IRS figures to your copies of W‑2s, 1099s, bank statements, and ledgers.
  3. If the IRS is correct, you can agree and pay the proposed tax or arrange a payment plan. If you disagree, provide documentation that supports your return (copies of corrected 1099s, receipts, invoices, or paystubs).
  4. If you discover an error on your return, file Form 1040‑X to amend. (See Form 1040‑X: https://www.irs.gov/forms-pubs/about-form-1040x)
  5. Consider professional help if the issue is complex—an enrolled agent, CPA, or tax attorney can draft a response and negotiate on your behalf. In my practice I’ve found timely, well‑documented responses dramatically reduce follow‑up audits.

Practical steps to reduce matching problems

Common misconceptions

  • “The IRS will audit me automatically if there’s a mismatch.” Not always—many notices are resolved by documentation or corrected returns.
  • “Only big mistakes trigger notices.” Small, repeated discrepancies across multiple forms can add up and trigger an inquiry.

Professional disclaimer

This article is educational and not personalized tax or legal advice. For guidance specific to your situation, consult a qualified tax professional or the IRS directly.

Authoritative sources

In my experience working with clients over 15+ years, most automated‑matching notices are resolved by careful record checks and prompt, documented responses. Keeping clean income records and reconciling payer forms before filing is the simplest way to avoid surprises.