Here’s a frustrating scenario that is affecting way too many Americans this tax season: You’ve been waiting months and months for a refund, but instead of getting a check from the Internal Revenue Service (IRS), you get a letter saying “you need to send supporting documentation.” Even worse, the IRS says it is holding your refund until the matter is resolved.
Welcome to the annoying world of correspondence audits. While overall the number of tax audits has declined in recent years, correspondence audits—basically a low-level audit that requires a relatively easy fix—still make up the vast majority of audits initiated by the IRS in any given year. They can happen for a number of reasons, including what the IRS calls “questionable refunds.” These audits are often related to the Earned Income Tax Credit, which is granted to taxpayers who make under a certain amount of money.
Sadly, many correspondence audits are never resolved, which means many taxpayers lose out on this credit. According to a recent report by the Taxpayer Advocate Service, more than 94,000 correspondence audits remain unresolved from the 2019 tax season.
An audit letter should tell you exactly which supporting documents you need to send, and you will typically get 30 days to do so. It’s important not to ignore this letter because, as the TAS points out, the agency “will not make a second contact.” The next letter you get might be a Notice of Deficiency, and you don’t want one of those.
There is a bit of good news here: According to the latest blog post from the National Taxpayer Advocate, the IRS is rolling out an online tool that will allow audited taxpayers to upload their supporting documentation with their phone or computer. (Currently, the only way to send the documentation is by mail or fax.) The Document Upload Tool, as it’s called, will not only make it easier for people to send their documents, but it will make the whole resolution process quicker—meaning you’ll get a refund faster if you’re owed one.
“It allows taxpayers to upload documents in real-time, allowing an IRS employee to discuss the documents with the taxpayers,” the blog post states. “If a taxpayer has an open correspondence examination audit, he or she should inquire with the examination telephone assistors to determine if the tool is available for their case.”
The tool should be available “later this month(9/2021).” The blog post contains other helpful information for people who have received a correspondence audit letter, including how you may be able to discuss your issue with the IRS through a secure messaging system, rather than using the phone, which has not worked so well for most people this season.