What Happens When You Are Found Guilty by Tax Audit?

What Happens When You Are Found Guilty by Tax Audit?
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The IRS may choose to audit your previous years' tax returns for any number of reasons, and some returns are even randomly selected for review. In general, being found "guilty" in an audit means the IRS examiner believes you owe additional taxes, although you have the right to dispute the findings. In some cases, your actions could be deemed as fraudulent.

Tips

  • If the IRS has found you "guilty" during a tax audit, this means that you owe additional funds on top of what has already been paid as part of your previous tax return. At this point, you have the option to appeal the conclusion if you so choose.

Notification of Findings

Within 30 days of the conclusion of your audit, you will receive written notification of the IRS examiner's findings. It is possible that the audit results could indicate that you owe no additional taxes and that your return is accepted as it is. If the examiner determined that you owe money, the notification will include a written explanation of the reason as well as the amount owed. You have the right to either agree or disagree with the findings.

Exploring Audit Results

If you agree that you owe the amount indicated, you will be asked to sign the examiner's report and return it to the IRS, as well as make arrangements to pay what you owe. If you disagree with the amount or the fact that you owe at all, you can request a further review of your case. The letter you receive will indicate your rights to appeal as well as the appropriate timeframe for response, which is 30 days. If you do not respond in a timely manner, the IRS will consider the adjustment to your return as valid.

Understanding the Appeal Process

If you file an appeal, you will have the opportunity to present your case before an IRS appeals agent. The agent acts independently of the IRS examiner and makes his own determination based on the facts of your case. In some cases, the appeals agent may reduce the amount you owe. You also have the option to take your case directly to federal tax court. Your inability to pay is not a valid reason to file an appeal.

Assessing Fraud Allegations

It is possible that the examiner could determine that you committed an act of fraud, as opposed to simple negligence. Common signs of fraud can include keeping two sets of books, submitting false receipts for the purpose of substantiating deductions, or altered canceled checks. According to the website of tax attorney Frederick W. Daily III, 98 percent of tax fraud perpetrators do not face criminal prosecution. Instead, the IRS assesses additional fines and penalties.