Discovering you owe money after a tax audit can be a major source of stress. Whether you’re an individual filer or a business owner, learning that you have IRS audit debt can leave you feeling overwhelmed, confused, and unsure of your next steps. Fortunately, with proper guidance and timely action, you can take control of the situation and avoid further consequences.

At The Law Office of Pietro Canestrelli, A.P.C., we specialize in helping clients manage tax debt found in audits and offer comprehensive legal representation for those facing IRS back taxes, interest, and penalties. This article explains the key causes of tax audit debt, the available options for resolution, and how a qualified tax attorney in California can help you move forward.

Why Did I Get Audited?

Understanding why the IRS selected your return for audit is the first step in addressing the situation. Some of the most common reasons include:

• Discrepancies between your return and information reported to the IRS
• Claims for large deductions or tax credits
• Unreported income from freelance work or side businesses
• Operating a cash-heavy or high-risk business
• Random selection

The IRS may initiate a correspondence audit by mail, request an in-person audit at an IRS office, or conduct a field audit at your home or business. Regardless of the method, if the IRS finds errors or omissions, it can lead to a tax debt along with penalties and interest.

What Kind of Tax Debt Can Result From an Audit?

The most common outcome of an audit is the IRS determining that you owe more than you originally reported. This can happen for several reasons:

• Underreported income (e.g., 1099 income not reported)
• Disallowed deductions or expenses
• Improper tax credits
• Unpaid payroll taxes (for businesses)
• Late filing penalties and interest

The IRS will issue a notice outlining your updated tax liability. This is when many taxpayers realize they need IRS audit help from a qualified professional.

Step 1: Review the IRS Audit Findings Carefully

You’ll typically receive one of two types of notices after an audit:

• A 30-day letter, giving you the opportunity to appeal the proposed changes
• A 90-day letter, which gives you 90 days to file a petition in U.S. Tax Court

Before doing anything, carefully review the notice and any supporting documents. If you believe the IRS made an error, you have the right to contest the findings. This is a crucial time to consult with an IRS audit lawyer who can help determine the best strategy moving forward.

Step 2: Understand Your Tax Debt Payment Options

If you agree with the audit findings or lose an appeal, the next step is addressing how to pay the balance. Fortunately, the IRS offers several options to manage tax debt.

Pay in Full

The most straightforward option is to pay your entire tax debt immediately, if possible. This stops interest and penalties from continuing to grow. Payments can be made online via IRS Direct Pay or EFTPS.

IRS Installment Agreement

If you can’t pay in full, the IRS offers payment plans that allow you to spread your tax debt over time:

• Short-term payment plan (up to 120 days)
• Long-term installment agreement (monthly payments beyond 120 days)

A tax debt lawyer can help you apply for an installment agreement and ensure that the monthly payments are manageable based on your financial situation.

Offer in Compromise

An Offer in Compromise (OIC) allows you to settle your tax debt for less than the full amount. To qualify, you must demonstrate financial hardship or doubt as to the IRS’s ability to collect the full amount owed.

This process involves a detailed financial review and submission of Form 656. A skilled offer in compromise attorney can significantly improve your chances of approval by presenting a compelling application.

Currently Not Collectible Status

If your financial situation is dire, you may qualify for Currently Not Collectible (CNC) status. This temporarily halts IRS collections such as wage garnishments and levies. Interest will continue to accrue, but you gain breathing room to improve your finances.

Step 3: Address Penalties and Interest

In addition to the tax debt itself, the IRS often adds penalties and interest that can cause your balance to grow quickly. Common penalties include:

• Failure to pay: 0.5% per month
• Failure to file: 5% per month
• Accuracy-related penalties: 20% of underpaid tax
• Civil fraud penalties: Up to 75% for willful violations

If you’ve received penalty notices, you may qualify for penalty abatement or reduction. Grounds for relief include:

• First-time penalty abatement
• Reasonable cause (e.g., medical emergency, natural disaster)
• Reliance on erroneous IRS advice

Working with an IRS debt resolution attorney improves your chances of successfully reducing or eliminating these penalties.

Step 4: Act Before the IRS Initiates Collection Actions

Ignoring your audit debt can lead to serious consequences. If you don’t act within the timeframes provided in your IRS notices, the agency can begin collections through:

• Federal tax liens against your property
• Wage garnishments
• Bank account levies
• Property seizure

To prevent these actions, it’s essential to act quickly. Consulting a tax attorney for audit resolution early in the process allows you to avoid many of the harshest collection methods.

Step 5: Hire a Tax Attorney for Audit Defense

While CPAs and enrolled agents can assist with preparing documentation, only a tax attorney can:

• Represent you in U.S. Tax Court
• Negotiate with IRS legal counsel
• Handle complex audits involving criminal tax investigations
• Develop a long-term strategy to keep you compliant

At The Law Office of Pietro Canestrelli, A.P.C., we provide comprehensive IRS audit representation and tax debt defense for clients across California and the United States.

Step 6: Fix the Issues That Caused the Audit

One of the most important parts of managing audit-related tax debt is ensuring it doesn’t happen again. Once your case is resolved, take steps to improve your tax compliance:

• Work with a licensed tax professional
• Track income and expenses with proper documentation
• File returns on time and accurately
• Review your eligibility for deductions and credits

If you’re a business owner, consider quarterly tax planning to stay ahead of liabilities. Our firm also provides reviews to help avoid future IRS tax audits.

FAQs: Owing Money After a Tax Audit

Can the IRS garnish my wages if I can’t pay my audit debt?
Yes. If you ignore notices or default on a payment plan, the IRS may issue a wage garnishment or levy your bank account.

How long do I have to pay tax debt from an audit?
Typically, the IRS expects payment within 21 days after accepting the audit findings—unless you set up a payment plan.

Can I appeal the IRS audit results?
Yes. You can file an appeal within 30 or 90 days, depending on the notice. Appeals can result in reduced or reversed findings if handled properly.

Do I need a lawyer to deal with the IRS?
While not legally required, a tax debt lawyer offers the best chance to minimize liability, stop collections, and resolve the issue favorably.

Serving Clients in California and Nationwide

At The Law Office of Pietro Canestrelli, A.P.C., we proudly serve clients in Temecula, San Diego, and across California and the United States. If you’ve received an audit notice or now owe the IRS money, don’t wait. Take proactive steps to protect your assets and future.

We offer:

• Personalized tax debt relief strategies
• Skilled representation in audits and appeals
• Help with IRS installment agreements, Offers in Compromise, and CNC status
• Peace of mind knowing a qualified legal advocate is on your side

Contact us today to schedule a confidential consultation and find out how we can help you manage IRS audit debt and reclaim your financial stability.