It can certainly be a difficult situation if the IRS conducts an audit and determines that you owe a significant amount in back taxes. You may have to pay fines or fees, along with the tax debt that you already owe. If this debt is very high, then you may want to consider things like an installment payment plan or an offer in compromise.
How did you find yourself in this position? What are some of the things that may trigger an audit?
Missing income sources
One of the main reasons why the IRS starts an audit is if they think there is unreported income. If they review your financial statements and find that you have earned a significant amount of money that was never even reported on your taxes – even if you claim it was just an honest mistake – the IRS may want to look into that more deeply.
Excessive deductions
Many people can deduct things on their taxes, such as writing off business expenses or purchases that the business made. But there are limits on what can and cannot be deducted. If there are excessive deductions, the IRS may think that you are attempting to commit fraud by writing off things that should not qualify.
A high level
Finally, it’s worth noting that the IRS often focuses on those with relatively high incomes. It costs time and money to perform an audit, so they need to know that it will be worth the effort required. A business that earns $25 million annually is much more likely to face an audit than an employee who makes $30,000 a year.
If you are facing an audit or other issues with the IRS, be sure you know exactly what legal steps you can take to resolve it.