Across Pennsylvania, South Jersey, and Maryland, thousands of taxpayers receive IRS notices each year stating that they underreported income. These notices show up in Philadelphia, Montgomery County, Bucks County, Delaware County, Camden County, Gloucester County, Cherry Hill, and throughout Maryland’s suburbs. Even people who are careful, organized, and responsible with their tax filings often find themselves caught off guard.
The notice may arrive as a CP2000, a Proposed Assessment, or a letter explaining that the IRS received information “not shown on your return.” The language can feel sharp and accusatory. But in reality, these notices rarely stem from intentional wrongdoing. They are almost always the result of mismatches — moments where the IRS’s automated system reads your income documents differently than you or your tax preparer did.
McCauley Law Offices works with taxpayers across the region to correct these mismatches, challenge IRS assumptions, and prevent the issue from growing into liens, levies, or other enforcement actions.
What the IRS Actually Means by “Underreported Income”
Underreported income simply means that the numbers on your tax return don’t match what the IRS has in its database. Employers, payment platforms, banks, brokerages, unemployment agencies, pension administrators, and contractors all send forms directly to the IRS.
These include:
- W-2s
- 1099-NECs and 1099-MISCs
- 1099-Ks
- 1099-INT and 1099-DIV
- 1099-B for investment sales
- 1099-R retirement distributions
- Unemployment compensation forms
- Gambling winnings from casinos
- State benefit or grant forms
If the IRS receives even one form you didn’t include — or one that contains a different number — you get flagged.
This is extremely common in the Tri-State region because of complex employment patterns, frequent job changes, gig work, multi-employer situations, remote work, and heavy investment activity.
Why Underreporting Notices Are So Common in Pennsylvania, New Jersey, and Maryland
The employment and income landscape across the region is uniquely varied. People often have a mix of W-2 jobs, independent contractor work, side gigs, retirement income, rental income, union jobs, and investment portfolios.
The IRS’s automated matching system simply isn’t designed to interpret this complexity accurately, which leads to mismatches.
Heavy concentration of healthcare and union work
Philadelphia, Camden, and Wilmington are major healthcare hubs. Nurses, techs, CNAs, and hospital staff often work multiple jobs, extra shifts, or change departments. Union workers in transportation, construction, and public services also move between assignments, generating numerous tax documents.
Remote work and multi-state employment
It’s very common for residents of PA, NJ, and MD to work remotely for companies in New York, Delaware, California, or Texas. Multi-state W-2 coding creates mismatches the IRS flags immediately.
Investment and retirement income
The region has a high percentage of retirees and professionals with:
- Stock portfolios
- RSUs
- ESPPs
- IRAs and 401(k)s
- Brokerage accounts
When cost basis is missing or incorrect, the IRS treats the entire sale as profit.
Gig work and supplemental income
Many residents have side earnings from:
- DoorDash
- Uber / Lyft
- Online freelance work
- Tutoring
- Home repair or landscaping
- Online marketplace sales
- Seasonal event work
These generate 1099s — often sent electronically — that taxpayers miss.
Unemployment and benefit payments
Pennsylvania, New Jersey, and Maryland issue unemployment, paid leave benefits, and other state-specific payments. One incorrectly coded form triggers an underreporting notice.
City wage tax confusion (Philadelphia)
Income reporting discrepancies between federal, state, and city wage tax forms can lead the IRS to believe your federal return is incorrect.
Family financial support
Transferring money between relatives, paying joint bills, or supporting dependents often leads to bank activity that the IRS misinterprets as income.
Across the Tri-State region, these patterns are extremely common and almost always fixable.
The CP2000: The Notice Most Taxpayers Receive
The CP2000 compares:
- The income you reported
- The income the IRS believes you earned
- The proposed balance due
- Penalties and interest
Although it looks formal and stern, it is not a bill. It is a proposed adjustment based on incomplete or mismatched data.
McCauley Law Offices frequently reduces or eliminates CP2000 assessments by providing the IRS with proper documentation.
Common Tri-State Scenarios That Trigger Underreporting Notices
A nurse working shifts at two hospitals
One W-2 may not be delivered or may be mailed to an old address.
A commuter with multiple employers
Someone living in South Jersey but working in Philadelphia may end up with several W-2s or corrected forms.
A remote worker with an out-of-state employer
Multi-state W-2s often confuse the IRS’s matching software.
A taxpayer receiving unemployment
State unemployment agencies sometimes revise their forms after filing season.
A retiree withdrawing from multiple accounts
Each account administrator issues separate 1099-Rs.
A freelance worker misses a digital 1099
Many platforms only send forms through email portals.
A taxpayer receives a 1099-K for selling personal items
The IRS interprets the full amount as profit unless explained.
A real estate professional with commission splits
Brokerages issue multiple 1099s in different amounts.
In nearly every one of these situations, the taxpayer didn’t do anything wrong — the IRS system simply doesn’t have enough context.
How McCauley Law Offices Fixes Underreporting Problems
Pulling IRS transcripts
McCauley Law Offices retrieves the Wage & Income Transcript to see exactly which forms the IRS has on file — including ones taxpayers didn’t know existed.
Reviewing and reconciling your true income
The firm compares your W-2s, 1099s, investment documents, unemployment records, retirement income, and bank deposits to determine what is accurate.
Identifying deposits that aren’t income
Transfers between accounts, family support, reimbursements, loan repayments, and shared expenses all require clarification.
Preparing corrections or amended returns
If necessary, the return is updated. If not, a complete dispute is prepared showing why the IRS’s proposal is incorrect.
Drafting a clear IRS response
McCauley Law Offices prepares a full, organized response including:
- A written narrative
- Supporting documentation
- Line-by-line explanations
- Reconciled numbers
The IRS is far more likely to accept your position when the information is clear, concise, and professionally presented.
Preventing escalation
If the IRS is moving toward collection actions, the firm can place your account on hold while the issue is reviewed — stopping garnishments, levies, or liens.
Why Responding Alone Often Creates Bigger Problems
Taxpayers who respond without professional representation often:
- Confirm income they don’t owe
- Provide too much information
- Miss deadlines
- Send incomplete documents
- Trigger additional IRS scrutiny
- Agree to incorrect IRS assumptions
A precise, strategic response prevents these pitfalls.
Final Thoughts
Underreporting notices across Pennsylvania, New Jersey, and Maryland are extremely common because the region’s income patterns are complex: remote work, union jobs, healthcare roles, gig income, investment portfolios, unemployment benefits, multi-state tax documents, and retirement accounts.
But these notices are also highly fixable.
McCauley Law Offices helps taxpayers resolve underreporting issues, correct IRS assumptions, and stop enforcement actions before they start.
