Audit Letter: Solving A Correspondence Audit

Today we are going to talk about strategies for handling a correspondence audit. What is a correspondence audit? A correspondence audit is an audit that is issued to the taxpayer through the mail and does not require an onsite review of the taxpayer’s tax return. The taxpayer will receive a notice in the mail requesting them to answer questions that the IRS wants to know more about.

Two Options Regarding an Audit Letter

The taxpayer has two options regarding the correspondence audit. The taxpayer can either choose to close the audit through the mail or they can ask for the audit to be forwarded to their local IRS office for further examination. The best option for the taxpayer is to close the case through the mail. This option is best because it is riskier to open the door to the local office to come and probe your tax return. The local office may find something else and begin asking even more questions than originally anticipated.

Here are the steps that you should take when dealing with a correspondence audit for the first time:

1. You want to be very quick with responding to the IRS when it comes to answering their questions. They will usually give you thirty days to respond. If this time is not enough for you then you can request an extension of time but you need to do so in writing before the thirty days is up.

2. You must be very thorough with your answers and how you address them. Make sure that you provide detailed explanations for each question and proof of your explanations to make your case. Supporting documents are very important in the process of closing an audit. The IRS wants to make sure you are telling the truth with regard to your answers.

3. Document all the interaction you have with the IRS. You want to cover your back in case something goes wrong. If you come to an agreement over the phone, make sure you document the IRS employees information so you have proof of the agreement.

4. You never want to mail anything to the IRS that is an original copy. If you are required to send in personal documents such as bank statements and loan information, make sure you make copies and then send the copies instead of the original documents.

5. You always want to send your mail to the IRS as certified mail. This way you have proof that your mail was sent in a timely manner and you cannot be blamed for any delays that may occur.

6. Make sure to send a copy of the correspondence audit letter you received. This tip will help speed up the process making it easier for the IRS to match your audit to the files the IRS has for you.

After you have complied with the IRS request for information regarding you tax return two things can happen. Either the IRS will agree with what you have supplied and close your case or they will issue you a thirty day letter giving you the option to appeal their decision within thirty days. If you do not appeal the thirty day letter then the IRS will issue a ninety day letter indicating the need for the taxpayer to make one of three decisions.

Three Other Options

These three decisions that the taxpayer must decide upon are, file a Tax Court petition where the taxpayer can fight the IRS decision, pay the tax due and then file a claim for refund, or the taxpayer can do nothing and the IRS will forward their case to the collection division of the IRS. If this takes place, the collection division of the IRS will take over the case and aggressively pursue the taxpayer for the back taxes owed.

About Paul Gaulkin CPA

Paul Gaulkin is a Certified Public Accountant and enrolled with the U.S. Treasury to practice before the IRS. Mr. Gaulkin possesses unique technical knowledge in the process of securing relief for taxpayers nationwide with IRS and State tax problems. With an accounting degree from Florida International University, he is able to transform complex tax and accounting problems into easy to understand solutions.


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