The Basics of a Correspondence Audit

Background and History

The IRS employs several audit types to verify taxpayer information, with correspondence audits being the most frequent and least intrusive. Developed to efficiently address minor discrepancies or verify specific return details, these mail-based audits allow the IRS to conserve resources while maintaining tax compliance. This approach has evolved with improved digital processing, enabling faster communication and resolution without in-person interaction.

How a Correspondence Audit Works

When the IRS identifies an inconsistency or requires proof regarding certain tax return items—such as a questionable deduction or income mismatch—it issues a letter by mail. Commonly called a “CP2000 notice” or simply a “request for information,” the correspondence explains the issue and outlines the documentation or explanation needed.

The process generally follows these steps:

• You receive an IRS letter detailing the audit scope and requested documents.
• You collect the relevant records like receipts, bank statements, or invoices.
• You send your response with supporting documents to the IRS by the stated deadline.
• The IRS reviews your submission and may accept your explanations, request more information, or make adjustments if necessary.

Real-World Examples

For instance, if you claimed a home office deduction without sufficient expense records, the IRS might request receipts or proof of the designated space. Another example is a discrepancy between reported interest income and what financial institutions reported to the IRS, prompting a letter asking for clarification.

Who is Subject to a Correspondence Audit?

Correspondence audits commonly affect taxpayers who:

• File relatively simple returns but have minor inconsistencies
• Report income that does not match IRS information returns like W-2s or 1099s
• Claim deductions or credits requiring validation

These audits are generally reserved for less complex issues, unlike field or office audits, which involve more detailed reviews or in-person meetings.

Effective Strategies for Handling Correspondence Audits

• Stay Calm: These audits are routine and usually straightforward.
• Review the Letter Carefully: Fully understand what information the IRS requests.
• Meet All Deadlines: Responding late can lead to penalties or further scrutiny.
• Send Copies of Documents: Retain originals for your records.
• Be Clear and Organized: Label documents and include concise explanations.
• Seek Professional Help When Needed: A tax advisor or CPA can clarify complex requests.

Common Misconceptions

• Ignoring an IRS letter can escalate problems and lead to penalties.
• Providing incomplete information will delay the audit resolution.
• An audit does not necessarily mean wrongdoing; often it’s a routine check.
• Maintaining thorough tax records in advance can prevent audit complications.

Frequently Asked Questions (FAQs)

Q: How long does a correspondence audit usually take?
A: Most correspondence audits are resolved within a few months after you submit your response.

Q: Can I contact the IRS for clarification?
A: Yes, the IRS contact number is provided in the letter. Be prepared with relevant documents before calling.

Q: What if I disagree with the IRS’s findings?
A: You may appeal or submit additional evidence. Consulting a tax professional is often beneficial.

Correspondence Audit Summary Table

Relevant Resources

For detailed IRS guidance on audits, visit the official IRS page on the audit process: IRS About the Audit Process. This resource provides authoritative information on audit types and procedures.

Getting an IRS audit letter can be unsettling, but correspondence audits are routine checks usually resolved by mail. By understanding the process and responding promptly and clearly, you can effectively manage the audit without needing in-person visits or formal hearings.

You might also find it useful to review our glossary entry on Tax Audit for a broader overview of IRS audit types and what to expect.