There are 3 ways the IRS can perform an audit:
If you are being audited by the IRS, you should always come prepared:
Why do you have to come prepared? Potential penalties are 20% of underpayment, 75% of underpayment. How to avoid it: show that you had a reasonable cause to underpay the tax and acted in good faith.
Don’t forget that you have 5th Amendment Right regarding the IRS audits. You can invoke this right to refuse to answer questions. (It usually doesn’t apply to producing documents). Although, invoking the 5th Amendment may be negatively viewed by the Court regarding assuming that you have something to hide. Although, it is your right.
Reference to ASTPS.com
Also, it is important to remember the Tweel case, where the 5th Circut Court of Appeals held that civil examination can not be used to conduct a criminal investigation. That would constitute public deceit.
IRS Revenue officers can show up unannounced at your place of business to conduct a field interview. The officers are expected to secure collection information and view assets in the field. If your business is a non-filing business, you may expect the IRS Revenue officer to visit your place of business at some point.
According to the IRS, around 32% of overall America’s taxes come from Payroll. This is the primary reason why the IRS doesn’t take it lightly when an employer doesn’t withhold payroll taxes.
What are the actions that the IRS take?
Treasure Department offers you to sign up at EFTPS free. If something is out of the ordinary the EFTPS will send an e-mail to the owner (FTD Alerts). That way the owner has time to address the issue.