If a taxpayer does not adequately respond during an audit, which of the following best describes the typical next step?

• A. The IRS may proceed with proposed adjustments and potentially escalate to Appeals.
• B. The case is automatically closed with no penalties.
• C. The taxpayer automatically loses the case.
• D. The IRS is prohibited from taking any action.

Answer: (A)

When a taxpayer doesn’t adequately respond, the audit continues along its formal path. The IRS uses the information available to finalize proposed adjustments and move the case forward, which can include issuing a notice that outlines the changes and any associated penalties. If the taxpayer later protests, the case can be sent to the Office of Appeals for review. This reflects the typical progression: the IRS doesn’t just stop or automatically close; it proceeds with the proposed adjustments and keeps the door open for an appeals review if the taxpayer chooses to challenge.

The other options don’t fit because cases aren’t automatically closed with no penalties, the taxpayer doesn’t automatically lose the case, and the IRS is not prohibited from taking action.