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March 13, 2012


Increased Use of Corr-Exams Compared to Audits Is Cause For Concern

An IRS audit isn’t a criminal proceeding in which the right to confront accusers literally applies.

There is still a big difference, however, between face-to-face IRS audits on the one hand, and so-called “corr exams” (correspondence-based exams) on the other.

This week, the National Taxpayer Advocate questioned the increasing use of correspondence exams. From fiscal year 2000 to fiscal year 2011, face-to-face audits increased by 56 percent, from 251,108 to 391,621. But correspondence-based exams increased far more – by 220 percent. In eleven years, they increased from 366,657 to 1.173,069.

The Taxpayer Advocate questions the fairness of this trend. “Today the IRS generally reserves face-to-face individual audits for the most affluent taxpayers,” wrote Nina Olson, the taxpayer advocate, in a blog post.

Taxpayers are far less likely to respond to notice of a face-to-face audit than to a corr-exam. This can easily result in valid tax claims being denied by the IRS.

Correspondence exams also have far lower rates of administrative appeals and U.S. Tax Court petitions than audits do. “These low rates,” the Taxpayer Advocate wrote, “may be the consequences of unrepresented and inexperienced taxpayers’ ignorance of the audit process and their right to appeal an unfavorable decision.”

Given these considerations, it is scarcely surprising that IRS surveys have shown far greater taxpayer satisfaction with the process for face-to-face audits than for corr exams. The percentage of taxpayers who said they were dissatisfied with corr exams was over double the rate of those who were dissatisfied with the audit process (41 percent compared to 18).

Source: “Taxpayer Advocate Questions IRS Audit Effectiveness.” Michael Cohn, Accounting Today, 3-13-12