What to Do After an IRS Audit in Virginia
What to do after an IRS audit in Virginia. Understand your next steps whether you agree or disagree with the findings, and how to prevent future audits.
What to Do After an IRS Audit in Virginia
The audit is over. The IRS examiner has finished reviewing your records and issued a report. Now what? Your next steps depend entirely on whether you agree with the findings, and if you owe additional tax, how you plan to handle it. For Virginia taxpayers, there is an added layer: IRS audit changes almost always trigger Virginia Department of Taxation implications. Here is your roadmap.
Key Takeaways:
- You have 30 days from the IRS examination report to agree, partially agree, or file an appeal: do not let this deadline pass without action
- IRS audit changes must be reported to the Virginia Department of Taxation within one year, or you face state penalties on top of federal ones
- If the audit results in a balance you cannot pay, Virginia residents have multiple resolution paths, from installment agreements to offers in compromise
Scenario 1: You Agree With the Audit Findings
If the IRS got it right, the fastest path is to sign the agreement form and resolve the balance. Agreeing stops the clock on additional interest accumulation from the appeals process and prevents a statutory notice of deficiency.
If you can pay the full amount: Pay it. Use IRS Direct Pay, EFTPS, or mail a check with the payment voucher. This closes the case.
If you cannot pay the full amount: You still have options. An installment agreement lets you pay monthly. For balances under $50,000, streamlined installment agreements are available without full financial disclosure. For larger amounts or financial hardship, an offer in compromise or currently not collectible status may apply.
If you owe more than you can realistically pay: Read our guide on owing the IRS more than you can pay in Virginia for a detailed breakdown of your options.
Scenario 2: You Disagree With the Audit Findings
If the IRS examiner got it wrong, partially or completely, you have the right to challenge the results. This is where most Virginia taxpayers need professional help.
30-day letter response: The examination report comes with a letter explaining your appeal rights. You have 30 days to file a formal protest (for assessments over $25,000) or request a small case conference (under $25,000). See our full guide on IRS audit appeals in Virginia.
What makes a strong appeal: Documentation the examiner did not see, legal arguments the examiner did not consider, or factual errors in the examiner's analysis. If you ran a Virginia small business and the examiner disallowed legitimate expenses, your bank records, receipts, and contracts are your appeal foundation.
90-day letter (statutory notice of deficiency): If you miss the 30-day window or appeals fails, the IRS sends a statutory notice of deficiency. You then have 90 days to petition the U.S. Tax Court. This is a firm deadline. Missing it means the tax is assessed and collection begins.
Scenario 3: Mixed Results
Most audit outcomes fall here. The IRS adjusts some items correctly, and gets other items wrong. In this case:
- Agree to the correct adjustments
- Appeal the incorrect ones
- Your tax professional can negotiate a partial agreement that resolves the undisputed items quickly while preserving your right to dispute the rest
The Virginia State Tax Impact
This is where Virginia taxpayers face an obligation that residents of some other states do not. Virginia requires you to report IRS audit changes to the Virginia Department of Taxation.
Filing requirement: If the IRS changes your federal adjusted gross income or any item affecting your Virginia return, you must file an amended Virginia return (Form 760C) within one year of the federal change becoming final.
What "final" means: The federal change is final when you agree to the findings, the appeals process concludes, or the Tax Court issues a decision.
State tax impact: Virginia's income tax (2% to 5.75%) is calculated on your federal adjusted gross income with Virginia-specific modifications. If the IRS increases your federal income, your Virginia tax liability almost always increases too.
Penalties for non-reporting: If you fail to file the amended Virginia return within one year, the Virginia Department of Taxation can assess the additional state tax plus penalties and interest. They will eventually learn about the federal changes, either through IRS information sharing or their own review.
Dual resolution: If the IRS audit results in both a federal balance and a Virginia state balance, you need a resolution strategy covering both. Virginia's collection statute (7 to 20 years depending on assessment date) can exceed the IRS timeline, so the state debt may not disappear even if the federal statute eventually expires.
Post-Audit Collection: What Happens If You Do Not Pay
If you agree to or lose the appeal on additional tax and do not pay, the IRS begins collection. Here is the escalation path:
Notices and demand letters: The IRS sends a series of notices, culminating in a final notice of intent to levy.
Federal tax lien: The IRS files a Notice of Federal Tax Lien, which attaches to all your property. For Virginia homeowners, this means your home, your vehicles, your bank accounts. See Virginia tax lien help for resolution options.
Wage garnishment: The IRS can levy your wages, taking a significant portion of each paycheck until the debt is satisfied. Virginia employers must comply. Learn about IRS wage garnishment in Virginia.
Bank levy: The IRS can seize funds in your bank accounts with 21 days notice after the levy is served to your bank.
For clearance holders: Federal employees and contractors in Virginia face an added risk: unresolved tax debt and collection actions appear in background investigations and can trigger security clearance reviews.
People Also Ask: After an IRS Audit in Virginia
Should I hire a tax professional after an IRS audit?
If you owe additional tax and cannot pay, or if you disagree with any findings, yes. A tax professional can evaluate your appeal options, negotiate with the IRS, set up payment arrangements that account for your actual financial situation, and coordinate with the Virginia Department of Taxation. If the audit resulted in no change or you agree with a small adjustment you can pay immediately, you may not need ongoing help.
How do I prevent future IRS audits in Virginia?
Keep thorough records for every deduction and credit you claim. Report all income, including 1099 income that the IRS already knows about. File on time. Be consistent with your prior returns. If you own a small business, separate personal and business expenses cleanly. If you are a federal employee with side income, report it accurately. The IRS targets discrepancies, not honest returns.
What if the IRS audits multiple years?
Multi-year audits are more complex but follow the same process: each year gets its own examination report and resolution. If you are appealing one year and agreeing to another, your tax professional coordinates the separate tracks. The Virginia reporting obligation (Form 760C) applies to each year that changes.
Can I request an audit reconsideration after agreeing?
Yes, but it is difficult. Audit reconsideration is available if you have new information the IRS did not consider, if the IRS made a computational error, or if the tax was assessed by default because you did not respond to the original audit notice. You must submit a request with supporting documentation to the IRS. This is not a guaranteed path, and it is generally better to address disagreements during the audit or appeals process, not after.
Protecting Yourself Going Forward
An IRS audit, even one that results in additional tax, is not the end. Virginia taxpayers who come out of an audit should take three steps:
- Resolve the balance through payment, installment agreement, or offer in compromise within 60 days of the final determination
- File the Virginia amended return (Form 760C) reporting the federal changes, and address any state balance simultaneously
- Fix the underlying issue that triggered the audit: improve record-keeping, adjust estimated payments, or restructure the deductions that drew scrutiny
A qualified Virginia tax professional like Virginia IRS audit representation specialist at Back Tax Expert Inc. can handle all three steps and ensure nothing falls through the cracks. Connect with a Virginia tax relief expert to discuss your post-audit situation.
Frequently Asked Questions
Can I be audited again for the same tax year in Virginia?
Generally, the IRS will not audit the same return twice unless there is a strong reason, such as fraud or related-party transactions. However, if your audit resulted in changes that affect other tax years, those years could be examined separately. The IRS can also audit different items on the same return that were not covered in the first audit.
Does an IRS audit affect my Virginia state taxes?
Yes. Virginia requires you to report IRS audit changes to the Virginia Department of Taxation within one year. If the IRS increased your federal taxable income, your Virginia state taxes likely increase as well. You must file an amended Virginia return (Form 760C) reflecting the federal changes. Failure to report can result in state penalties and interest.
How long after an audit does the IRS have to collect in Virginia?
The IRS has 10 years from the date of assessment to collect the tax. After an audit, the assessment date is when the additional tax is formally recorded, typically after you agree to the findings or the appeals process concludes. Virginia's Department of Taxation has a collection statute of 7 years for post-July 2016 assessments (extendable to 10) or 20 years for older ones. Both clocks run independently.
This page is for informational purposes only and does not constitute legal or tax advice. Tax situations vary, and outcomes depend on individual circumstances. Consult a qualified tax professional for advice specific to your situation. TaxReliefNearMe.org is a directory and educational resource, not a tax resolution firm.
Bill Fritton
Back Tax Expert
Enrolled Agent and MBA with decades of experience resolving IRS and Virginia state tax problems. Owner of Back Tax Expert Inc. in Vienna, VA.