What Is a Correspondence Audit?

A correspondence audit is a type of tax audit that the Internal Revenue Service (IRS) performs via mail. Correspondence audits are the lowest level of auditing performed by the IRS. In a correspondence audit, the IRS sends the taxpayer a written request for additional information about a specific item or issue on their tax return.

Understanding Correspondence Audit

A correspondence audit is considered to be the least serious form of an audit with a limited scope. These types of audits are generally only used for relatively simple matters and involve small amounts of money. The next step after a correspondence audit is an office audit, where the IRS requires the taxpayer to come to an IRS location to discuss the issue in question.

In a correspondence audit, as long as the taxpayer can produce sufficient evidence to resolve the issue, the procedure is closed. The penalties for an audit that turns up errors or fraud could include payment of additional taxes, liens on property, fines, garnishment, criminal investigations, and court hearings, so it's important to have legal representation in the event of an audit. Most attorneys will advise taxpayers to keep answers as simple as possible and never offer additional information, as that could allow the agent to expand the scope of the audit.

Other Types of Audits

The three types of audits conducted by the IRS are correspondence, office, and field audits. A correspondence audit can expand and become an in-person audit if the issues grow more complex or the organization does not respond. 

An office audit is a type of in-person audit in which a representative from the IRS interviews the taxpayer and inspects their records, usually at an IRS office. The purpose of an office audit is to make sure the taxpayer is accurately reporting income and deductions and paying the lawful amount of tax. These audits often only cover a few specific issues identified by the IRS in a written notice to the taxpayer. 

The IRS may select a tax return for an office audit at random, or a tax return may also be selected because of suspected errors. IRS Publication 556 provides details on examination and audit procedures.

A field audit is another type of audit similar to an office audit but instead occurs at either the taxpayers’ home, place of business or accountant's office, and not at an IRS office. Field audits are typically scheduled for more complicated audits and can be quite extensive. These thorough audits can last from one day to a week, depending on the size of the taxpayer’s business.