In a post gtoday on the Taxpayer Advocate Blog, Nina Olson questions the effectiveness of correspondence audits, asking "Are they really as effective as the IRS thinks? (Mar. 13, 2012). As Olson notes, unlike in-person audits where the taxpayer meets with the tax examiner, these correspondence audits are faceless and involve different tax examiners responding to taxpayer interactions.
With corr exams, there is no one Tax Examiner assigned to the case. Instead, a computer issues a letter that tells the taxpayer to send in documentation to support his or her claim of an item on the tax return. The contact name listed on that letter is “Tax Examiner” and the phone number is that of the IRS Service Center unit that issued the letter. Each time the taxpayer calls to discuss the corr exam, he or she will reach a different Tax Examiner.
The correspondence audits were pushed under the Bush regime. "Between fiscal year (FY) 2000 and FY 2011, face-to-face audits increased by 56 percent, from 251,108 to 391,621. By contrast, corr exams increased by 220 percent, from 366,657 to 1,173,069." But Olson rightly notes that the correspondence exams are used for less affluent taxpayers who are also less likely to understand audit processes: they lose by default when they fail to respond, and they respond less frequently (30% rate for corr exams, compared to an 85% rate for face-to-face audits). Taxpayers generally rate face-to-face exams as much better than correspondence exams: a majority of corr exam taxpayers think they are not given appropriate consdieration and are unsatisfied with the fairness of their treatment. Olson notes that these corr exams also result in more audit reconsiderations, as taxpayers submit new information not considered in the original audit.
Olson recognizes that corr exams are not likely to go away given the current climate of starving government (even government agencies that are clearly central to government functioning), so she is asking taxpayers for suggestions on ways to improve the coor exam system.
As the National Taxpayer Advocate, I’m interested in hearing from taxpayers and their representatives about what your experiences have been with correspondence exams and how you think the IRS can improve them. For example, would you want to have one employee handle the case once you’ve submitted documentation to the IRS, so you have a person to contact? Would you be willing to tolerate not being able to reach that person immediately (e.g., he or she was on the phone with another taxpayer)? How we can use technology to improve the corr exam process? For example, would making an appointment for an audit conference by video be better than an audit conducted by correspondence?
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