The IRS Correspondence Audit

Simply put, this type of audit occurs when the IRS finds a small error on your return and asks you to explain it through the mail. Known internally by the IRS as a Campus Examination, the correspondence audit is considered the most basic type of audit. They involve less technical tax issues and can be completed, like their name implies, through the mail.

As the IRS notes, the purpose of a correspondence audit is to resolve tax problems quickly and easily through correspondence and/or by telephone. 

Examiners at the correspondence and office levels are much less invasive. The examining agent is required to process many cases without much familiarity with the return itself.

In fact, it is often the case that the examiner has not reviewed the taxpayer’s file or the return until after the taxpayer has replied to the agent’s correspondence. The agent generally reviews the taxpayer’s file on the day of the interview.

The Internal Revenue Service correspondence audits, also known as a Campus Examination, represent nearly 75% of the IRS’s tax investigations. The IRS comes across various concerns, problems, and issues with corporate and individual tax returns that require a solution.

While IRS correspondence audits are the most basic type, they resolve fewer technical tax issues with individuals and organizations. This IRS audit type is typical for non-profit and philanthropic companies with simple matters involving small amounts.

As the name implies, the Internal Revenue Service conducts correspondence audits via mail. Moreover, correspondence audits helps the IRS quickly resolve taxpayers‘ return problems through the mail or telephone. Taxpayers receive a 566 letter with a Schedule C form requesting additional information on returns from home office expenses or charitable donations.

For example, the IRS may request your auto expense receipts to verify your claims and justify your deduction. The Internal Revenue Service request to evaluate and verify your documentation and receipts for accuracy. The Internal Revenue service will close correspondence audit cases when the taxpayer provides adequate proof to resolve the issue.

The commissioner gives taxpayers 30 days to respond. Failure to reply may result in penalties, fines, and interest. Usually, you’ll get another letter detailing the IRS decision with an appeal option after the letter with accurate documents and evidence.

Many taxpayers get scared at the mention of the word “audit,” but the IRS only wants additional evidence to ensure accuracy. While correspondence audits are straightforward, taxpayers can complete the process three to six months after providing the necessary evidence.

After receiving a notification from the IRS, consider visiting a CPA if you’re unsure of the best way to respond. Hiring a CPA may be your best solution for professional advice on handling the correspondence audit letter.

Many tax professionals believe that you have zero problems after receiving this letter of documentation if you didn’t commit any tax fraud. But if the reverse is the case, a CPA can help you avoid penalties, interest, and fines from the IRS. While the IRS handles correspondence audits via mail, below are letters taxpayers receive:

The Simple Letter

Taxpayers receive a simple letter from the Internal Revenue Service detailing the debts owed to the government. While this message is not a technical audit, it requires a response for a quick resolution. This IRS letter can result from an omission of income or a math error on your tax return, which we will discuss further.

• • • Math Errors

The IRS might send a simple acknowledgment letter if you made a math mistake on your submitted tax return. For example, if your income is $3500, but you reported $3000 or $500 due to mathematical error, you owe the omitted tax. Consider replying and rectifying the case after receiving the simple letter from the Internal Revenue Service indicating the error.

• • • Omission of Income

Many independent contractors and investment companies fill out the 1099 and W-2 Forms for tax purposes. But mistakes are inevitable, so if you omitted income on any of these forms, you’d receive a letter from the IRS.

After receiving this letter, consider owning the faults and pay the debt with incurred interest or penalties before the tax due. Or disagree with the letter and file for further examination with evidence via mail or telephone and contact a tax professional for the best advice.