Can You Just Pay If You Get Audited?

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Understanding IRS Audits

An IRS audit involves a review of your tax return by the Internal Revenue Service (IRS) to verify its accuracy and compliance with tax laws. If the IRS identifies any discrepancies or errors, it may propose adjustments to your tax liability.

Consequences of Failing an Audit

If you fail an audit, it means that the IRS has made changes to your tax return, resulting in additional taxes owed or a reduced refund. This can also lead to penalties and interest charges.

Options After Failing an Audit

If you agree with the audit findings, you can choose to pay the additional taxes and any applicable penalties. However, if you disagree with the findings, you have the option to dispute them.

Disputing Audit Findings

To dispute audit findings, you can request a managerial review or file an appeal. A managerial review involves meeting with an IRS employee and an appeals officer to discuss your case. Filing an appeal requires submitting a written protest to the IRS within the specified time frame.

Payment Options

If you owe additional taxes after an audit and choose to pay, you have several options:

  • Payment Plan: The IRS allows taxpayers to enter into a payment plan to pay off their tax debt over time, typically up to six years.
  • Offer in Compromise: If you are unable to pay your tax debt in full, you can apply for an offer in compromise, which allows you to settle for less than the full amount owed.
  • Partial Payment Installment Agreement: This option allows you to make payments on a settlement, but if your financial situation improves, you may have to pay the full balance.
  • Currently Not Collectible: You can submit a financial statement showing that you cannot pay, and the IRS may temporarily stop collection actions against you.
  • Bankruptcy: This option should only be considered as a last resort, and you should consult with a bankruptcy attorney as only certain tax debts can be discharged.

Penalty Abatement

Getting relief from audit penalties can be challenging. However, you can apply for penalty abatement if you can demonstrate reasonable cause for the errors on your tax return.

Innocent Spouse Relief

If you are held liable for tax debts incurred by your spouse or former spouse, you may qualify for innocent spouse relief. To be eligible, you must prove that you were unaware of the understated tax and had no reason to know.

If you get audited and fail, you are not obligated to pay the additional taxes and penalties immediately. You have the right to dispute the findings and explore payment options that suit your financial situation. It is advisable to seek professional guidance from a tax attorney or accountant to navigate the audit process and minimize your tax liability.

What do I do if I get audited by the IRS? Three steps to handling an IRS Audit

FAQ

Can I just pay the audit?

You can make an early payment on any amount due, all or part of the tax/fee, or only the items for which you agree. Your early payment does not affect your right to protest the proposed amount due or to receive a refund.

What happens if I get audited and owe money?

Penalties and interest both apply when you have unpaid taxes. For instance, if you file your return late, you’ll have to pay penalties and interest on the unpaid tax. If you incur audit penalties, interest will accrue on the penalty. The IRS adjusts its interest rate quarterly, and it varies based on the prime rate.

Am I in trouble if I get audited?

As uncommon as they may be, most people still fear that an audit means they’re in trouble. Just because you are facing an income tax audit, though, it does not necessarily mean you did anything wrong.

What happens if you get audited and they find a mistake?

It will impose tax penalties if errors are found in your tax returns. There’s also the possibility of jail time in serious cases of tax evasion and tax fraud. The IRS may normally flag one return for audit but it does have the authority to audit returns from the past several years.

Do you get audited by the IRS?

Although the IRS audits only a small percentage of filed returns, there is a chance the agency will audit your own. The myths about who or who does not get audited—and why—run the gamut. The looming myth out there suggests the audit process is something to be desperately feared.

Can a tax return be audited?

It will impose tax penalties if errors are found in your tax returns. There’s also the possibility of jail time in serious cases of tax evasion and tax fraud . The IRS may normally flag one return for audit but it does have the authority to audit returns from the past several years.

Can I go to jail for an IRS audit?

This does not mean you’ll end up in jail. Not all IRS audits will result in a penalty. If you’re able to justify the items being reviewed on your return, the IRS will conclude the audit without imposing any charges or penalties.

How do tax audits work?

Tax audits usually start with a letter, and in most cases the IRS handles them entirely through correspondence. You may picture a tax audit like a scene in the movies: IRS agents in dark suits show up at your door and sift through boxes of papers. Instead, most tax audits are much less dramatic.

Related posts:

  1. Understanding the Filing Requirements: Who Needs to File a Tax Return?
  2. Does 80TTB Include SCSS Interest? A Comprehensive Guide
  3. Major Tax Changes for 2022: A Comprehensive Guide
  4. What Happens When You Get Audited by the IRS?

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