What's with a Correspondence Audit?

A correspondence audit through the mail is commenced when an error on your tax return is uncovered by the IRS computers. You will be told of the discrepancy on an IRS notice and you will be asked to submit documents to substantiate the tax return. You will either be issued a refund or asked to settle the additional taxes if the error is mathematical.

Be prepared against IRS problems and audits by always making copies of your return and its attached documentation. Cooperate with a correspondence audit.

No matter what the IRS�s request is, make sure you compare a copy of the return with what's written on the IRS notice to verify the necessity of a correction or the need of additional taxes. Do not automatically send the requested money without further inquiries. They can make mistakes too.

Follow the instructions in the IRS notice promptly. Ignoring it will only make things worse.

If you don't agree with the IRS notice, follow the directions on it in a timely manner. Other documents should be attached. On the other hand, if you agree with it, simply sign and date the IRS notice and send it with the correct payment.

If you disagree with the notice, the IRS will evaluate your claim, and if it is allowed, you will be notified and the audit with stop. An Examination Report will be sent to you if the IRS disallows your claim, and you have 30 days to accept the changes and sign it or ask for an appeal.

If you have queries regarding the audit, you can contact the name and number that is listed on the notice or write to the auditor,requesting for him to contact you.

Facing an IRS Audit

The two kinds of audits done by the IRS are the face-to-face audit and correspondence audit. Your IRS issues are just starting if you receive notice of either of these 2.

The Correspondence Audit

The mail is how a correspondence audit is done. Corrections on tax returns are found by the IRS computers. If so, a notice is mailed to the taxpayer. This IRS notice shouldn't be dismissed. If you need to pay more taxes, act immediately. Interest and penalties may be added to the bill if there are delays. If you do not agree with the notice, mail your reply and attach documentation to support your case. You should have copies of the correspondence.

Face-to-face Audit

You know you have an impending face-to-face audit if you get a notice specifying a date and time to meet with a tax auditor or revenue agent or requesting you to contact them for an appointment.

What must be done?

• Do not dismiss the notice. If you do not reply within thirty days, the IRS will take action. You might receive a bill next time.
  
• Read the notice and follow the directions. You'll be informed which items are under review and the information you will need to take with you to the audit.
  
• Organize your documents. It is your responsibility to prove that your tax return is accurate. If you go to the audit organized and prepared for the auditor�s queries, it will make the job easier for the auditor. Consider this a plus.
  
• Ask for copies of missing records because you need supporting documents to prove your case.
  
• Don't take information not required to the audit. If information that was not required is brought up, tell the auditor that it isn't on hand.
  
• Be calm and polite in the audit.
  
• Only copies must be given to the auditor, not the original documents.
  
• Try to answer inquiries with either "yes" and "no." Small talk may lead you to divulge sensitive information. The auditor will have cause to believe that you have not reported all your income on your tax return when you speak about big purchases or vacations. This could tell him that he has to expand the audit.
  
• Know that you have a right to an appeal if you do not agree with the audit's outcome.