{"id":354020,"date":"2022-08-19T07:44:46","date_gmt":"2022-08-19T12:44:46","guid":{"rendered":"https:\/\/ability-fl-prod.internetbrands.com\/ability-law\/tax\/tax-problems-audits\/tax-audit-penalties-and-consequences.html"},"modified":"2023-05-16T14:51:11","modified_gmt":"2023-05-16T19:51:11","slug":"tax-audit-penalties-and-consequences","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/tax\/tax-problems-audits\/tax-audit-penalties-and-consequences.html","title":{"rendered":"Tax Audit Penalties and Consequences"},"content":{"rendered":"\n
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Tax Audit Penalties and Consequences<\/h1>\n
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\n By J.P. Finet, J.D.<\/a> | Legally reviewed by Steven Ellison, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

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Key Takeaways<\/h2>\n

Tax audits and penalties are two of the key tools that the IRS uses to ensure U.S. taxpayers file honest and accurate returns. While the  audit process<\/a> can be unpleasant, the main deterrent for most taxpayers is the substantial tax penalties<\/a> that the IRS can impose, along with the requirment to pay the owed tax plus interest.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n

The most common penalty imposed on taxpayers following an audit is the 20% accuracy-related penalty. The IRS can also assess civil fraud penalties and recommend criminal prosecution. In certain limited circumstances, you can avoid the accuracy-related penalty if you show reasonable cause for underpaying your taxes.
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Accuracy-Related Penalty<\/h2>\r\n

If the IRS audits your income tax return and finds it is not accurate, the tax code allows an assessment of a 20% accuracy-related penalty based on the understated amount. For example, let’s say the IRS finds that you should have paid $10,000 in additional taxes and assesses a 20% accuracy-related penalty. In that case, you would pay a $2,000 penalty in addition to the $10,000 in unpaid taxes and any interest due.<\/p>\r\n

The IRS will impose the accuracy-related penalty if you understate the amount of tax due on your return for one or more of the following reasons:<\/p>\r\n