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What Is a Correspondence Audit?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 21 April 2018
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    2003-2018
    Conjecture Corporation
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A correspondence audit is a type of auditing procedure employed by some revenue agencies which has to do with resolving issues with tax returns submitted to those agencies. This particular approach is normally utilized when some sort of minor discrepancy exists in the detail of the return, and the revenue agency requires additional information in order to resolve the problem. In the event that it is not possible to successfully resolve the matter by means of communicating with the taxpayer by means of the postal system, there is a good chance that a face to face meeting between an agent of the revenue agency and the taxpayer will ensue.

The use of a correspondence audit is common when there are questions about one or more line items in a tax return. For example, there may be some concern regarding a deduction claimed by the taxpayer, which prompts a mailed request from the revenue agency for the taxpayer to provide additional supporting documentation. Upon receiving and reviewing that data, the agency will either approve the deduction and consider the matter closed, or take additional action that is appropriate for the situation.

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One of the benefits of a correspondence audit is that the approach makes it possible to resolve issues with tax returns with relatively little cost or dedication of resources on the part of both the tax neither party has to carve out time that could be spent on other matters. For example, a correspondence audit does not require the taxpayer to take time off from work in order to meet with an agent, and the agency does not have to spend the time and expense of sending an agent to meet with the taxpayer.

Not all tax issues can be managed with the use of a correspondence audit. Minor issues that require nothing more than some additional data to resolve can often be handled in this manner, but if the discrepancy is significant and appears to be an indication of a willful attempt to evade paying taxes, there is a good chance that the revenue agency will proceed using an office audit approach rather than conducting an audit by mail. In any event, the taxpayer should be sure to maintain comprehensive records that detail each and every type of deduction claimed, so providing adequate proof of the validity of each deduction can be produced when and as necessary.

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