If a person is audited by the IRS and agrees with the audit findings, he/she may sign an agreement form and pay any taxes due, including applicable penalties and interest, to close the audit.
How Does the IRS Close a Tax Audit?
The IRS performs tax audits when inaccuracies or errors are located on tax returns. If a taxpayer faces an audit and agrees with the tax examiner’s findings, he/she can sign an agreement form and pay any taxes due, including penalties and interest. If the taxpayer disagrees, he/she can request a conference with an IRS manager, request mediation, or file an appeal.
In an IRS audit, the main goal of the auditor is to get the taxpayer to agree with the IRS findings, sign an agreed report, and close the report as quickly as possible. The IRS encourages tax auditors to obtain agreed reports in a timely manner. For this reason, an examiner may be willing to negotiate certain disputed items to close the audit quickly.
If a tax audit is not resolved, the IRS may request an extension on the statute of limitations for tax assessment, which is generally three years after a return is filed. Extending the statute of limitations gives a taxpayer more time to resolve taxes or file an appeal, and gives the IRS more time to process audit results. If a taxpayer doesn’t want to extend the statute of limitations, the examiner will make a determination based upon the information provided.
Paying Taxes, Penalties, and Interest
The IRS offers several ways to resolve taxes owed, including penalties and interest assessed for late payments. If a taxpayer can’t pay the full amount owed, he/she can request a payment plan or installment agreement that allows more time to pay, or an offer in compromise that allows the taxpayer to pay less than what is owed.
If a taxpayer owes money after a tax audit, the IRS has up to 10 years from the date of the assessment to collect the debt. Penalties and interest start accruing the day after the tax filing due date. However, the collection can be temporarily suspended during a request for an installment agreement or an offer in compromise. If these requests are denied, the IRS will suspend collection for an additional 30 days, and during any appeals process.