What Happens If You Are Audited and Found Guilty | Know Your Tax Relief Options

What the IRS Can Do Next: What Happens If You Are Audited and Found Liable

 An IRS audit can conclude with a finding that you owe additional taxes, civil penalties, or — in serious cases — face criminal charges. Understanding the audit outcome process, your legal rights, and the tax relief options available can help you evaluate the next steps available in your situation. This guide breaks down each possible outcome and explains the concrete steps to take right away to protect your finances and your future.

Common Tax Challenges: Civil Penalties After an IRS Audit Finding

When the IRS audits your return and finds errors or underreported income, the most common result is a civil assessment. This means you owe back taxes, penalties, and interest — but you are not facing criminal prosecution.

Civil penalties issued after an IRS audit can include:

  1. Accuracy-related penalty — Assessed when the IRS determines negligence or a substantial understatement of tax (according to IRS Topic No. 653, irs.gov)
  2. Civil fraud penalty — Applied when the IRS identifies intentional wrongdoing in your tax filing
  3. Failure-to-pay penalty — Accrues on any unpaid tax balance remaining after the audit assessment date

According to the IRS Data Book, irs.gov, the IRS recommends additional tax in the majority of examined returns each year, with civil adjustments being far more common than criminal referrals.

Resolution Process: What Happens If an IRS Audit Leads to a Tax Fraud Determination

Tax fraud findings represent the most serious outcome of what happens if you are audited and found guilty. The IRS Criminal Investigation (CI) division handles cases involving willful tax evasion, false return filings, or deliberate concealment of income from the agency.

What criminal tax prosecution can involve:

  • Formal referral to the Department of Justice Tax Division
  • Federal indictment and trial before a U.S. District Court
  • Incarceration and substantial fines upon conviction under the Internal Revenue Code

According to the IRS Criminal Investigation Annual Report, CI initiates thousands of investigations annually, with conviction rates remaining consistently high in cases that reach prosecution.

If you are under criminal audit review, retaining a qualified tax attorney immediately is essential. Legal counsel can communicate directly with the IRS on your behalf, protect your constitutional rights, and work toward a negotiated resolution before formal charges are filed.

Tax Relief Options After an IRS Audit Finding

Being found liable after an IRS audit does not mean your situation is beyond repair. The IRS provides structured resolution programs that taxpayers may explore depending on eligibility and the facts of their situation.

Available tax relief programs include:

  • Offer in Compromise — Settle your tax debt for less than the full amount owed if you meet IRS eligibility criteria (according to IRS Form 656 Booklet, irs.gov)
  • Installment Agreement — Pay your audit-assessed balance over time through structured monthly payments the IRS approves
  • Penalty Abatement — Request removal of qualifying penalties using first-time penalty abatement eligibility or a documented reasonable cause
  • Innocent Spouse Relief — Available when audit findings stem from errors made by your spouse without your knowledge or consent

Responding to an IRS Audit Finding

Understanding what happens if you are audited and found guilty is the critical first step — acting on that knowledge is what protects your finances and your future. An IRS audit finding, whether civil or criminal, demands a strategic, legally sound response developed with professional guidance. The IRS offers several resolution programs that taxpayers may consider with the guidance of a licensed tax professional. 

Get Help Today: Understanding Your Options After an IRS Audit Finding

Facing an IRS audit finding is serious, but you do not have to navigate it alone. A qualified tax debt attorney can review your audit results, identify relief options, and protect your rights before the IRS takes collection action. Start with a free case review, connect with qualified attorneys, or explore innocent spouse relief if your audit involves a spouse’s tax errors. Time matters — take the first step now.

Frequently Asked Questions

The IRS issues a Notice of Deficiency and formally assesses the additional tax owed along with applicable penalties and accruing interest. You retain the right to appeal the finding within the timeframes specified by the IRS.

Yes. If the IRS refers your case to Criminal Investigation and you are convicted of willful tax evasion or fraud, federal imprisonment is a possible sentence under the Internal Revenue Code.

A civil audit finding results in additional taxes and penalties owed to the IRS, while a criminal audit finding involves willful misconduct and can lead to federal prosecution, fines, and incarceration.

The IRS generally has three years from the filing date to audit a return, but this window extends to six years when substantial income underreporting is involved, according to IRS Publication 556, irs.gov.

Yes. A tax attorney can represent you before the IRS, negotiate a tax resolution, appeal the findings, and protect you from aggressive IRS collection action following an audit determination.

Key Takeaways

  • What happens if you are audited and found guilty typically begins with a civil tax assessment, including back taxes, penalties, and interest owed to the IRS.
  • Criminal audit findings involve willful fraud or tax evasion and can lead to federal prosecution under IRS Criminal Investigation referrals.
  • The IRS offers tax relief programs — including Offers in Compromise and installment agreements — that may reduce audit-assessed tax balances.
  • Innocent spouse relief is available to taxpayers whose audit findings result from a spouse’s unreported income or erroneous deductions without their knowledge.
  • Acting quickly after an IRS audit finding with qualified legal help provides the strongest opportunity to resolve your tax debt on favorable terms.
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