How to Avoid Tax Penalties After an Audit

The good news: You survived an audit. So what now?

If you're audited and the result is that there are no adjustments to your return (or if you get a refund), it decreases your odds of being audited in subsequent years. If you're audited on the same items two years in a row with no additional taxes due, the IRS manual actually recommends that you not be audited for the same items for another year.

But what if you're audited and the IRS finds that you owe additional tax? You'll want to resolve those outstanding tax liabilities as soon as possible in order to avoid further interest and penalties.

If you can afford to pay the tax due in full, you'll prevent any future penalties and interest from piling up. If you can't afford to pay the tax due in full from your regular operating account, consider dipping into savings accounts or money markets. The IRS goes so far as to suggest that you consider a home equity loan, personal loan or credit card, since penalties and interest for your taxes may cost you more over the long run.