Everton face a 12-point deduction after an investigation into alleged breaches of financial rules by the Premier League club, according to a report on Wednesday.
The Daily Telegraph said Premier League chiefs have asked an independent commission to impose the severe sanction, which would be the largest points penalty in the history of the competition.
Losing 12 points would leave Everton on minus-five points at the bottom of this season's table.
Sean Dyche's side are currently in 16th place with seven points after losing six of their first nine games.
The Premier League referred Everton to the commission in March over an alleged breach of its profitability and sustainability rules over a period ending with the 2021-22 season.
Top-flight clubs are permitted to lose a maximum of £105 million over a three-year period or face sanctions.
Everton said in a statement issued on the day that news of the referral was confirmed: "The club strongly contests the allegation of non-compliance and together with its independent team of experts is entirely confident that it remains compliant with all financial rules and regulations.
"Everton is prepared to robustly defend its position to the commission. The club has, over several years, provided information to the Premier League in an open and transparent manner and has consciously chosen to act with the utmost good faith at all times."
Everton have recorded annual losses for five consecutive years, more than £430 million in total over the period.
The club are the subject of a takeover bid by American private investment firm 777 Partners, which last week denied a New York Times report that its bid had stalled because of a failure to supply information to the Financial Conduct Authority.