Legal Definitions - correspondence audit

A correspondence audit is a review conducted by a government agency, such as a tax authority, where all communication and documentation exchanges occur through mail or electronic means, without an in-person meeting or interview. This type of audit typically focuses on specific items or discrepancies identified in a submitted document, like a tax return, and requires the audited party to provide written explanations and supporting documents.

• Example 1: Individual Taxpayer

  Maria receives a letter from the Internal Revenue Service (IRS) questioning a specific deduction she claimed for home office expenses on her recent tax return. The letter asks her to mail copies of utility bills, rent receipts, and a diagram of her home showing the dedicated office space to substantiate her claim. Maria gathers the requested documents and sends them back to the IRS. This scenario illustrates a correspondence audit because the entire process, from the initial inquiry to Maria's submission of evidence, is handled through mail without any face-to-face interaction with an IRS agent.

• Example 2: Small Business Grant Application

  A small bakery, "Sweet Treats Inc.," applied for a state grant designed to support local businesses. A few weeks after submitting their application, the bakery's owner receives an email from the state's Department of Commerce requesting additional documentation regarding their reported employee wages and benefits. The email asks for copies of payroll records and health insurance statements to be submitted electronically within two weeks. This is a correspondence audit because the state agency is reviewing specific financial details of the grant application by requesting and receiving documentation remotely, without an in-person visit to the bakery or a meeting with its owner.

• Example 3: Social Security Benefits Review

  Mr. Henderson, who receives Social Security disability benefits, gets a letter from the Social Security Administration (SSA) requesting updated medical records and a detailed explanation of his current living expenses. The letter states that the SSA is reviewing his eligibility and asks him to mail the requested information by a specific deadline. Mr. Henderson compiles the documents and mails them back to the SSA. This situation exemplifies a correspondence audit because the SSA is conducting a review of his ongoing eligibility for benefits by requesting and receiving all necessary information and documentation through postal mail, without requiring him to attend an interview or meeting.