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NTA Update on the 2020 and 2021 Filing Season Challenges

Significant Concern with the IRS Correspondence Audit Function

David R. Stubblefield, EA, Smith Jackson Boyer & Bovard PLLC

A correspondence audit is generally considered the simplest and least invasive type of an IRS audit, conducted remotely through letters and phone calls with the IRS examiner. However, practitioners and taxpayers have encountered a breakdown in the process relating to correspondence audits with no fix in sight.

When a Substitute for Return (SFR) or other audit activity produces an Examination Report, the cover letter contains the name of the Correspondence Audit Unit representative—or examiner—as a contact person. However, during the COVID-19 operational shifts, it appears that these examiners no longer have their direct contact phone lines, which impedes timely communication from practitioners or taxpayers who have questions or want to discuss their case. A central number is listed on the cover letter but, when called, indicates a “high call volume” statement and the call is terminated. Also, there is no e-fax number given for the taxpayer or their representative to reach the examiner with questions or to provide information on the discrepancy.

The Correspondence Audit Unit is sending out automated form letters that are not customized to address the case status. For example, a requested Form 1040 tax return was certified mailed to the Ogden Correspondence Audit Unit in May 2021 and not opened until August 2021. In the interim, the IRS sent a letter to the taxpayer that the information had been submitted and reviewed and the SFR audit report would still be used to assess additional tax, penalties and interest. It was only when the envelope was opened in August that someone from the IRS called the taxpayer’s representative to acknowledge receipt.

With the IRS increasing the number of correspondence audits, it is imperative that the assigned examiner have a direct line as well as an assigned e-fax number. If a certified mail envelope containing information is important enough to be sent in that manner, there must be some priority within the IRS to expedite opening the envelope and take appropriate action.

Another area of concern with the correspondence audit process is that while the initial contact letter to the taxpayer assigns an IRS examiner to the case, there is no guarantee that the taxpayer/representative will be talking to that individual. If a correspondence audit takes 3-4 months to complete, the taxpayer or representative might talk to four different examiners who will have to rely on the quality of the case notes by prior examiners. There is no continuity of case knowledge on the part of the IRS. The Taxpayer Advocate Service continues to support a single point of contact for all correspondence audits.

NTA Blog: Lifecycle of a Tax Return: Correspondence Audits


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