rs-irs-audits Archives - Page 8 of 9

What Are the Types of Penalties That I Could Face in the Audit?

May 25, 2026July 10, 2020 by Brotman Law

Key Takeaways

Topic: What Are the Types of Penalties That I Could Face in the Audit?
The most common penalty is the negligence penalty which is about 20 percent.
If at all possible you want to avoid that negligence penalty and knock this thing down to an accuracy penalty which is about 10 percent.

So the penalty structure in an audit is really rangy and it can range anywhere from a five percent penalty all the way up to a seventy five percent penalty depending on the conduct and the course of dealing during the audit and how the material is presented. The most common penalty is the negligence penalty which is about 20 percent. If at all possible you want to avoid that negligence penalty and knock this thing down to an accuracy penalty which is about 10 percent. An accuracy penalty is usually the best case scenario because the accuracy penalty is mandatory for adjustments that are $5,000 or more in tax. Generally speaking with most of our clients, although we try and get them out with flying colors, there’s usually some reason that the IRS has audited another return. So a $5,000 adjustment is usually not out of the ordinary; however, we’ll do everything that we can during the course of the audit to mitigate any penalties. For more serious cases, the goal in the audit is to mitigate the civil fraud penalty which is a 75% penalty. In addition to the 75% penalty on top of the tax that you owe, civil fraud prevents certain resolutions within IRS collections. That’s why it’s really important to avoid the stigma of fraud going forward in your IRS matter.

What Does the IRS Appeals Process Look Like?

May 25, 2026July 10, 2020 by Brotman Law

So IRS appeals is supposed to be an independent body that is neutral and that’s designed to resolve disputes with the IRS prior to going to tax collections. In reality Appeals is staffed with a bunch of former auditors and a bunch of former collection agents however we’ve had a lot of positive experiences in the course of Appeals in this firm so I like dealing with appeals. I find the appeals process is generally fair and impartial and generally yields a pretty good result depending on the circumstances. Now the good news with appeals is that the auditor is not involved in the process at all. The auditor has taken

Key Takeaways

So IRS appeals is supposed to be an independent body that is neutral and that’s designed to resolve disputes with the IRS prior to going to tax collections.
the time to prepare and submit an audit report which gets forwarded to appeals, but you have the opportunity before the case gets to the appeals officer’s desk.

What Happens If I Owe Money at the End of an IRS Audit?

May 25, 2026July 10, 2020 by Brotman Law

So if you owe money at the end of an IRS audit it’s like owing liability on your taxes. You can pay the liability, you could work out a payment plan or you can go into collections and work out a resolution. Generally speaking what happens is the auditor will close the audit. That bill will be an issue and if you don’t appeal that bill, you’ll go directly into collections. The best thing to do is to speak with the auditor and see if you can negotiate a straight handoff to collections. It’s not possible in all cases particularly where the liability is small but if you discuss things with the auditor they may be able to shortcut the process into collections and allow you to work out a resolution of the liability. This also tends to happen in cases where they’re a large audit. The auditor will pass you off to a revenue officer and you’ll start working with that revenue officer immediately to try and collect the liability but in either case if you owe money, don’t worry there’s a lot of things that you can do on the IRS side to mitigate that liability and to work out terms that you can potentially deal with.

Key Takeaways

Topic: What Happens If I Owe Money at the End of an IRS Audit?
So if you owe money at the end of an IRS audit it’s like owing liability on your taxes.
You can pay the liability, you could work out a payment plan or you can go into collections and work out a resolution.

Dealing with an IRS Audit?

Every audit has a scope — and what you produce in response sets the direction of the examination. Whether you’re just opening an audit notice or already in correspondence, a brief review can clarify where you are and what your options are.

Discuss My IRS Audit → Or call: (619) 378-3138

Why Should I Hire Brotman Law to Defend Me in My IRS Audit?

May 25, 2026July 10, 2020 by Brotman Law

Key Takeaways

Topic: Why Should I Hire Brotman Law to Defend Me in My IRS Audit?
We have a long track record of successfully defending our clients in IRS audits.
We’ve got a really good measure of technical skill at the firm and can deal with things that are extremely complex.

We have a long track record of successfully defending our clients in IRS audits. We’ve got a really good measure of technical skill at the firm and can deal with things that are extremely complex. We can make simple audits go away very quickly. Even if I don’t have any magic beans in my desk and I can’t make your liability just magically disappear, the strategy and the thought and effort that we put in and the preparation work tends to yield very positive results for our clients. We’re very comfortable moving through the tax procedure chain and dealing with IRS examination at all levels. There’s a certain strategy to an audit because the audit and a tax return will ultimately tell a story and the question that you have to ask yourself is who’s going to tell that story. If you get out in front of an audit and you put the investment into the preparation, you can usually save yourself a lot of time, money and headache and mitigate any penalties that are associated with the audit. Now obviously that’s on a case-by-case basis, but we have a long track record of results. We’re really good at advocating on our client’s behalf and we’re really good at getting people out of audits for less liability than they would have going in it by themselves.

Dealing with an IRS Audit?

Discuss My IRS Audit → Or call: (619) 378-3138

Will I Go to Jail If I Owe Money to the IRS?

May 25, 2026July 10, 2020 by Brotman Law

Owing money to the IRS will not send you to jail. The IRS is a collection agency, not a prosecution machine — and the overwhelming majority of people with tax debt never face criminal charges of any kind.

That said, the distinction between owing taxes and committing a crime is real and worth understanding. Not paying a tax bill is a civil matter. Lying to the IRS about what you owe is potentially a criminal one. Those are two different situations, governed by two different parts of the tax code, and the IRS handles them very differently.

The Legal Difference: Failure to Pay vs. Tax Evasion

Failing to pay taxes is a civil penalty under IRC § 6651. Tax evasion is a federal crime under IRC § 7201.

Under IRC § 6651(a)(2), the IRS imposes a failure-to-pay penalty of 0.5% per month on unpaid tax, up to a maximum of 25%. That’s expensive — but it’s a financial consequence, not a criminal one. The IRS assesses it by mail and collects it through the normal civil process.

Tax evasion under IRC § 7201 is different. It requires the government to prove willful conduct — that you knew you owed taxes and deliberately tried to avoid paying or reporting them. Conviction carries a potential sentence of up to five years in federal prison plus substantial fines. But conviction requires a criminal prosecution, a grand jury, a trial, and proof beyond a reasonable doubt. The bar is high. Most people with tax debt never come anywhere near it.

How Rare Criminal Prosecution Actually Is

The IRS Criminal Investigation (CI) division opened approximately 2,500 criminal cases in its most recent fiscal year, out of more than 150 million individual returns filed.

That’s a prosecution rate of roughly 0.0017%. CI focuses its resources on fraud cases with clear evidence of willful conduct: false returns, hidden offshore accounts, unreported income from illegal sources, structured cash transactions designed to avoid reporting thresholds. A taxpayer who fell behind on their tax bill and got in over their head is not the CI target profile.

The IRS prefers to collect money. Criminal prosecution is expensive, slow, and it collects nothing. The IRS has strong financial incentives to work through the civil collections process first.

What Actually Happens When You Owe Back Taxes

When you have unpaid taxes, the IRS follows a standard civil collections sequence: notices, then a lien, then collection action.

The process typically starts with a CP501 balance due notice, followed by a CP503 second notice, and then a CP504 — which is the IRS’s intent to levy. If you still don’t respond or pay, the IRS can file a Notice of Federal Tax Lien (which attaches to your property) and issue levies against your wages, bank accounts, or other assets. All of this is civil. None of it is criminal.

You have rights at each stage. You can request a Collection Due Process (CDP) hearing under IRC § 6330 to challenge the collection action or propose an alternative resolution. The IRS cannot levy while a CDP hearing is pending.

Behaviors That Shift Civil Cases Toward Criminal Investigation

The conduct that draws criminal attention is not falling behind — it is actively lying or concealing.

Specific patterns that tend to attract CI referrals: filing returns that materially understate income; holding assets through nominees to hide them from the IRS; maintaining unreported foreign accounts in violation of FBAR requirements; diverting payroll trust fund taxes for personal use; and structuring bank deposits to avoid the $10,000 currency transaction reporting threshold. These involve affirmative deception, not just unpaid bills.

If you have any of these facts in your background — even old ones — that changes the conversation and you should talk to a criminal tax attorney before doing anything else with the IRS.

What to Do If You Owe Back Taxes

The civil resolution options for back tax debt are real and the IRS uses them regularly.

Form 9465 — Installment Agreement Request — is the most common path. The IRS typically approves streamlined installment agreements for balances under $50,000 without requiring detailed financial disclosure. For larger balances or hardship situations, an Offer in Compromise (OIC) settles the debt for less than the full amount owed if you can demonstrate that the IRS cannot collect more. Currently Non-Collectible (CNC) status pauses collection when you genuinely cannot pay your basic living expenses and the tax bill. None of these require a courtroom.

Frequently Asked Questions

Will I go to jail for not filing my taxes?

Willful failure to file is a federal misdemeanor under IRC § 7203, carrying up to one year in prison — but criminal prosecution for non-filing is rare and typically reserved for people who repeatedly and deliberately fail to file while earning significant income. If you have unfiled returns, filing them late is almost always better than continuing to ignore them. The IRS has a voluntary compliance framework that generally results in civil penalties, not prosecution.

Can the IRS put you in jail for owing back taxes?

No. The IRS cannot imprison anyone. Criminal prosecution is handled by the Department of Justice on referral from IRS Criminal Investigation. The IRS’s own tools are civil: liens, levies, wage garnishments, and collection enforcement. Owing taxes — even a lot of them — does not by itself trigger a criminal referral.

What is the difference between tax fraud and tax evasion?

Tax evasion (IRC § 7201) is the criminal offense — willfully failing to pay or report taxes you owe, with the intent to evade. Tax fraud is a broader term that includes both civil fraud (IRC § 6663, a 75% penalty on underpaid tax) and criminal conduct. Civil tax fraud does not require prosecution; the IRS assesses it as a penalty. Criminal fraud or evasion requires a conviction in federal court.

If you’re dealing with back taxes and trying to figure out your options, our IRS tax debt resolution page covers installment agreements, Offers in Compromise, and when each makes sense — or book a free 15-minute call to talk through your specific situation.

Have a Tax Question or Notice?

If you’re dealing with an IRS audit, collection action, California state tax matter, or any other tax issue, we can review your situation in a free 15-minute consultation.

Schedule a Free Call → Or call: (619) 378-3138

The Complete Guide to IRS Audits

May 25, 2026July 2, 2020 by Brotman Law

Key Takeaways

What Is an IRS Audit?
Types of Audits
How Does the Audit Proceed?
Presentation Is Important
What Constitutes Taxable Income?

What Is an IRS Audit?

It is every small business owner’s worst nightmare … they have been notified by the IRS that they are going to be audited. IRS audits have a lot of bad connotations, but on a very basic level, an IRS audit is the IRS coming in and checking that your tax return was filed correctly.

How a Tax Attorney Can Help with Your Tax Lien

May 25, 2026December 21, 2016 by Brotman Law

Key Takeaways

All three agencies can issue a lien against personal property, real or personal, tangible or intangible.
The tax law is not only more complex in California, but the state tax representatives are generally more difficult to deal with.
A tax attorney helps to level the playing field when dealing with the state of California and their representatives.

Our last few posts have been about how the various California state tax agencies handle tax liens.

A brief review:

The Board of Equalization (BOE) administers the sales and use tax.
The Franchise Tax Board (FTB) administers and enforces the individual and corporate state income tax laws and property taxes.
The Employee Development Department (EDD) administers payroll tax and unemployment and disability insurance for the state.

Everything You Need to Know About Tax Liens, Pt. 2

May 25, 2026November 23, 2016 by Brotman Law

Everything You Need To Know About Tax Liens 2

In Part 1, you learned what a lien is, how taxpayers are notified of a lien, and what elements are required for a valid lien. In Part 2, you will read how a lien can impact your credit report, who has access to a list of those with liens, and what happens during bankruptcy and other financial events if a lien is involved.

Everything You Need to Know About Tax Liens, Pt. 1

May 25, 2026November 16, 2016 by Brotman Law

The tax community is a house somewhat divided over the effectiveness of liens. On the one hand, the government needs to protect their interests in regards to taxes owed them. On the other hand, tax liens are filed against taxpayers with few or no assets to file a lien against.

What is the Taxpayer Advocate?

May 25, 2026December 17, 2013 by Brotman Law

The Taxpayer Advocate helps taxpayers resolve problems with the IRS. The Taxpayer Advocate also recommends changes to help prevent problems in the future. The advocate handles those tax problems that are causing significant financial difficulty; when you or your business are facing immediate, adverse threat; and when you have tried to contact the IRS repeatedly to no avail. The Taxpayer Advocate is a member of the Taxpayer Advocate Service (TAS).

Key Takeaways

The mission of the Taxpayer Advocate Service is to help taxpayers resolve their tax problems and recommend changes to help prevent future tax problems.
You must qualify to receive help through the Taxpayer Advocate Service. The next section outlines the eligibility requirements of the service.
The Taxpayer Advocate Service is a free service. The assistance is tailored to meet each taxpayer’s need and it is available for businesses as well as individuals. Each state houses at least one Taxpayer Advocate.