Correspondence Audit

What Is a Correspondence Audit?

The term correspondence audit alludes to a tax audit conducted via mail or telephone by the Internal Revenue Service (IRS). Correspondence audits are typically conducted on organizations, like foundations and nonprofits.

The IRS sends the organization a written request for extra information about a specific thing or issue on their tax return and may keep on working with officers via telephone. It is viewed as the most reduced level of auditing performed by the IRS. Correspondence audits can possibly turn out to be more convoluted.

Understanding Correspondence Audits

Now and again, the IRS might run over worries, issues, or problems with individual or corporate tax returns. The agency regularly conducts audits to guarantee that these circumstances are fulfilled and that taxpayers are filing their tax returns accurately according to U.S. tax laws. One type of audit is the correspondence audit.

A correspondence audit is viewed as the least serious form of an audit. All things considered, it has an exceptionally limited scope. These audits are generally just utilized for charitable and nonprofit organizations, dealing with somewhat simple matters that include small amounts of money. However long the taxpayer can deliver adequate evidence to determine the issue, the methodology is closed.

The next step after a correspondence audit is an office audit, where the IRS requires the taxpayer to come to an IRS location to examine the issue being referred to with an agent. In the event that the agent discovers different issues or isn't happy with the information given, the audit could be expanded. For this reason most attorneys prompt taxpayers to keep replies as simple as could really be expected and never offer extra information, as that could permit the agent to extend the scope of the audit.

The punishments for an audit that turns up errors or fraud could incorporate payment of extra taxes, liens on property, fines, garnishment, criminal examinations, and court hearings, so having legal representation in the event of an audit is important.

Correspondence Audit Process

Organizations ought to comprehend how they're chosen for a correspondence audit and the cycle in question so they're better prepared in the event they need to complete one.

The IRS typically picks subjects at random or may conduct audits on the off chance that there are irregularities in an organization's tax returns. The agency is informed via mail requesting extra reports or information. When received, the agent conducts the exam in an IRS office, by telephone, or recorded as a hard copy. A closing conference is then finished by telephone.

In the event that no changes are required, the audit is closed and the IRS issues a confirmation letter. However, assuming changes must be made, the IRS might take at least one of the accompanying actions:

• A change in tax or status
• Getting outstanding returns
• A closing understanding
• The repudiation of the organization's status

The case can be closed assuming that the organization consents to the changes. On the off chance that the organization disagrees, it can file an appeal.

[IRS Publication 556](/irs-bar 556) gives subtleties on examination and audit procedures.

Instructions to Manage a Correspondence Audit

Try not to panic on the off chance that you get a notice about a correspondence audit. This sort of audit is frequently extremely simple and direct, so there's actually compelling reason need to worry as long as you stay organized and present your defense right away.

Begin by ensuring you comprehend what's being requested from you. Guarantee you understand what the problem and records you might have to support your case. Your letter will have a cutoff time by which you really want to present your evidence, so guarantee you stay aware and act rapidly. On the off chance that you don't answer inside that time period, the agency sends you a Notice of Deficiency.

In the event that you're uncertain of the cycle and need assistance exploring through it or just need representation, counsel a tax professional or attorney.

Types of Audits

The IRS might choose a tax return for an office audit at random. In different cases, a tax return might be chosen due to thought errors. The three types of audits conducted by the IRS are correspondence, office, and field audits. As verified over, a correspondence audit can extend and turn into an in-person audit on the off chance that the issues develop more complex or the organization doesn't answer.

Office Audit

A office audit is a type of in-person audit wherein a representative from the IRS meets the taxpayer and reviews their records. This normally happens at an IRS office. The purpose of an office audit is to ensure the taxpayer is precisely reporting income and deductions and paying the lawful amount of tax. These audits frequently just cover a couple of specific issues distinguished by the IRS in a written notice to the taxpayer.

Field Audit

A field audit is one more type of audit like an office audit however rather happens at either the taxpayers' home, place of business or bookkeeper's office, and not at an IRS office. Field audits are ordinarily scheduled for additional confounded audits and can be very broad. These careful audits can last from one day to seven days, contingent upon the size of the taxpayer's business.

Features

• Audits of this nature can turn out to be more muddled in the event that taxpayers can't give suitable supporting documentation or don't answer.
• A correspondence audit is a simple survey of tax returns conducted by the IRS.
• On the off chance that you receive a notice, get organized and answer before the cutoff time or get a professional to assist you with exploring the cycle on the off chance that you want assistance.
• This sort of audit is typically focused on causes and different nonprofits.
• The IRS agent responsible starts contact via mail or telephone requesting explanation on issues or problems with an organization's tax return(s).

FAQ

What Can Trigger an IRS Audit?

A portion of the key factors that can trigger an audit incorporate neglecting to report the entirety of your income, higher annual income, different deductions, or huge changes from your previous tax returns. Now and again, however, the IRS might choose you for an audit at random.

What Is the Difference Between an Audit and a Correspondence Audit?

Audits are typically conducted in person. Correspondence audits, then again, are surveys conducted by the IRS through the mail. The agency normally sends a notice to the taxpayer requesting evidence and supporting reports when an irregularity is identified or on the other hand in the event that they're chosen for a random audit. General audits can be more muddled while correspondence audits will quite often be extremely simple.

How Long Does a Correspondence Audit Take?

Correspondence audits are the most direct requests. Most taxpayers get a written notice in the mail inside six to seven months of presenting their tax returns. Taxpayers can anticipate that the audit should be complete three to six months from presenting their evidence.

What Are the Different Types of IRS Audits?

The IRS has three unique types of audits. Correspondence audits are the simplest and are conducted via mail as well as telephone. Office audits expect taxpayers to go to an IRS office to meet with an agent. A field office is one more in-person meeting, for the most part at the taxpayer's home or business.