The Correspondence Audit is an audit conducted entirely by mail. This type of audit is initiated when the IRS issues an official IRS Notice announcing to a taxpayer that their tax return, or a portion of their return, has been selected for further examination. The notice will typically request that more information or documentation be submitted regarding certain specific items on the return. Very often, the requested information involves itemized deductions such as stock transactions or the sale of real estate, where there is a discrepancy between what has been reported by the taxpayer and the documentation received from a third party.
A taxpayer receiving such a notice should read it carefully and submit everything that has been requested within the specified time period. It is best to submit copies of documents rather than the originals. Once the IRS receives that taxpayer’s response, they will review the additional information and issue an Audit Report. The results of the Audit report can either be accepted by the taxpayer or submitted for appeal. Most of the audits conducted by the IRS are correspondence Audits.