IRS audit

Letter Audit

The most common type of IRS audit is the letter audit or otherwise known as the correspondence audit. The letter audit is the most common type of IRS audit. If a tax case can be resolved with just a letter audit or a correspondence audit, then the taxpayer will not have to meet face-to-face with an IRS auditor.

If the tax payer receives a letter from the IRS, it is very wise to not ignore the IRS' letter but do what the IRS commands. Alternatively, if a taxpayer does not agree with the IRS' finding, he or she could dispute it.

What is a letter audit?

If a tax return is filed complete, with no missing information or tax forms (see before an IRS audit), then that tax return will go through the Automatic Data Processing or ADP for short.

The Automatic Data Processing (ADP) is a computer program that compares information on the tax return with any other tax forms bearing the same Social Security number search as W-2 forms, 1099 forms, K-1 one forms.

The tax return completed by the tax payer must contain at least the information supplied to the IRS by employers and other third parties.

letter irs audit

The ADP program will also check, to a certain extent, that the tax deductions claimed on a tax return are legitimate tax deductions allowed by the IRS.

Discrepancies Found

If there is a discrepancy, then the IRS will send a letter to the tax payer detailing how the mistake affects the taxpayer's tax liabilities.

  • If the mistake results in the taxpayer owing the IRS less money, then take credit will be given and a taxpayer may receive a refund from the IRS.
  • If the mistake results in the taxpayer owing the IRS more money, then the IRS will demand more money in the letter it sends.

You can either agree with the IRS or you can disagree. Just because the IRS thinks you owe more it does not mean that you actually do. Sometimes, the IRS can make mistakes having to deal with millions of taxpayers all at once. If you are received a letter audit from the IRS, then see what to do if the IRS audits you to read about your options of what to do.