If there's one thing taxpayers dread almost as much as owing the IRS money, it's getting audited. While nobody wants to go through the audit process, much of the time, it's a far less harrowing experience than most of us have been led to believe. In fact, if your return is flagged for further scrutiny, the most you're likely to face is what's known as a correspondence audit.

As the name implies, a correspondence audit is simply a tax audit by mail. Unlike a full-blown IRS examination, in which an agent will visit your property and comb through your records, with a correspondence audit, you'll simply get a letter requesting further information regarding your taxes. In some cases, you might also receive a CP2000 letter or notice in which the IRS proposes an adjustment to your taxes. It's important to address whatever mail audit materials you receive as quickly as possible to avoid problems down the line.

Person holding audit letter

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Dealing with a correspondence audit

More than 75% of audits are conducted as correspondence audits, so if your return is picked, you can rest assured that you most likely won't have to meet with an IRS agent face-to-face. That said, you will have to respond to whatever notice the IRS sends you.

In some cases, the IRS might request more information in order to process your return. This request is known as a 566 letter, and its purpose is to provide you with a list of missing documents needed to verify that your return is correct. If you get one of these letters, all you'll need to do is provide the requested documentation, and that should put the matter to rest.

That said, you should know that while most audits are conducted rather quickly, the IRS has up to three years to audit a given return -- so don't be surprised if you receive a 566 letter for a return you filed several years prior. Just be sure to retain all of your records until that three-year statute of limitations expires.

Another notice you might receive in the mail is the CP2000 letter, which is a proposed adjustment for underpaying or overpaying your taxes. The IRS will send out a CP2000 when the information you provide on your tax return doesn't match its records. This could happen if, for instance, you report that you earned $5,000 in income from a certain company, and that company files a 1099 form with the IRS stating it paid you $6,000.

Keep in mind that a CP2000 notice could also work out in your favor. If the IRS finds that you've overreported your income, it will make you aware that you're due a refund.

Once you receive a CP2000, you have the option to agree or disagree with what it says. If you agree, and you owe money, you're required to either submit payment to the IRS right away or request a payment plan to pay off your balance. If you disagree with the letter, you'll need to provide documentation in support of your claim and return the form within 30 days of receipt. The IRS will then review the information you send over and either reverse its proposed changes, or forward your return for additional review.

Don't panic

It's natural to get nervous when you receive a notice from the IRS, but if you're selected for a correspondence audit, don't panic. For one thing, that audit might get you some money back. In 2015, for example, the IRS gave out over $1 billion in refunds to taxpayers it decided to audit. Furthermore, despite all the stories you hear, your chances of getting audited are actually pretty slim. Less than 1% of tax returns are chosen for an audit, and if you report all of your income and stick to legitimate deductions, your chances of being selected are even lower.

Finally, if you really want to avoid an audit, consider filing your return electronically. You're 21 times more likely to make a critical error if you file a paper return, and that could spell the difference between getting audited or submitting your return and calling it a day.