IRS Plans to Increase Correspondence Audits

As a result of a report by the Treasury Inspector General for Tax Administration (TIGTA), the IRS is considering increasing correspondence audits to include both the prior and subsequent tax years for any year selected for audit. A correspondence audit is an audit conducted by mail where the IRS sends a Notice of Intent to Assess a tax liability based upon apparent errors on the taxpayer's return or upon third party information, such as 1099's, which are not included on the taxpayer's return. TIGTA statistics indicate that for fiscal year 2012 the IRS assessed 9.2 billion dollars in additional taxes as a result of 1.1 million correspondence audits. TIGTA concludes that filing checks should be conducted to determine whether the same pattern of non-compliance identified in the original tax year selected for audit are also present on prior and subsequent year returns. Out of 102 returns selected for testing, TIGTA determined that similar tax issues existed on 43 of the 102 taxpayer's prior and subsequent years returns.