For those of you who use Turbo Tax, when you get to the point in the Turbo Tax application where you file your taxes, there is an extra-cost option (I think it is $49.95) called Tax Audit. They promise to represent you in the event you are audited.

If you have signed up for this extra-cost option, and ended up needing to use it, I am curious how things went - were you satisfied with their service?

Thanks for any feedback!

Following this thread for responses as I have purchased the audit defense for the last 5 years, but thank goodness I have not needed it.

I've purchased it every time (probably the last 10 or fifteen years at least). An I've used it exactly once. Worth every penny.

Pretty good deal for TT.

Let's say they have 1M people opt in for the audit protection in the 50K plus income level, they collect $50M and statistically have to represent 4,800 taxpayers. That's $10,417 per taxpayer that they would have to expend before they lose a buck. Not likely they are going to have to do that. A definite profit center! Now, if you are a high risk taxpayer you are probably a winner.

IRS Audit Rates by Income Level for Individuals (2017)


Column 1: Income Range

Column 2: Percentage of Total Returns Filed in Year 2016

Column 3: Percentage of Returns Audited

No adjusted gross income 1.69% 2.55%
$1 – $24,999 36.47% 0.71%
$25,000-$49,999 23.33% 0.49%
$50,000-$74,999 13.26% 0.48%

Here's what I think since I use Turbo Tax myself. I switched from doing things manually as soon as the first tax program was available.

If you're really worried about an audit, then you shouldn't be using turbo tax; you should be using a cpa.

I've used turbo tax with schedule C itemized deductions for most of everything there except medical deductions. I've used the self-employed business forms for a side business of teaching that I did with depreciations, social security,etc. I've also done home refis and sales. Stocks and bonds transactions. So I think I've done some fairly complicated stuff. I even had to deal with overseas earnings because of some mutual funds I used to have.

I never pay for the audit service. I figure if I do get tagged for an audit, I have two options - claim ignorance because it's not like I'm out to cheat on my taxes or get a tax lawyer who advertises on the radio often. Actually, I have a legal service that provides me with a lawyer when i need one.

OK, a bit more disclosure....

I had a number of tax-related events happen in tax year 2015. Although the tax return was pretty straightforward, I bought the optional audit defense.

Later last year (2018) I got a notice from my state that I had an invalid deduction from my state income for 2015. Additional tax to be paid amounted to about $1,600. I promptly contacted the tax audit service.

They have been very nice, and fairly responsive. They emphasize they should handle all interaction with the state, and I have followed tax audit's instructions, and sent them images of all requested documentation.

It turns out Tax Audit claims the state's position is invalid, and that I do not owe the additional tax. I even heard verbally, through tax audit, that the state agreed with them, and that a deduction I entered on my 2015 tax return was entered in the wrong place on the form.

Tax Audit claims they have called my state's tax office, they have sent them all my documentation, etc., but I continue to get notices from my state that I still owe $1,600. Yesterday, I received yet another notice from the state that is threatening possible legal action and that they may have a portion of my paycheck, or bank account garnished to obtain the amount owed.

Naturally, I called Tax Audit late yesterday, and they are looking into it. They said that it could be the latest letter from the state was in process before they received the last set of documentation Tax Audit sent them. They are going to call my state's tax office. But now I am getting nervous. I don't want to pay $1,600 if I don't owe them the money, but even more importantly, I don't want the state messing around with my paycheck or my bank accounts.

Any thoughts on what I should do?

Well, I heard back from Tax Audit Defense already...They called my state's tax department, and they confirmed they have received my information, but haven't evaluated it yet. They aren't sure why I was sent a notice. They have put a 60-day hold on any further action while they evaluate the information sent to them.

So, for now, there is no action on my part. The tax audit service appears to be doing what I paid them to do. But when you get threatening notices from your state, it's nerve wracking to hear second hand what is going on.

I know hearing from any gov body, especially, if it’s the IRS can be nerve wracking. But $1,600 isn’t a “I might lose my house” problem or it shouldn’t be.

Is $1,600 the total of taxes you owe including penalties?

You're lucky. If I'm off by a single penny on my employment taxes the very first letter threatens to seize bank accounts.

I wouldn't loose any sleep over it. Let your people finish resolving it.

Rey and A1abdj,

Thanks...I am ready to withdraw from the window ledge for now :-)

It's not the amount that bothers me. It's that:

1) I have proven I don't owe it (Although this has yet to be "officially" accepted by my state)

2) If I pay it so I don't get threatening notices, it will be damn difficult to get it back, and

3) If I don't pay it, the bureaucracy involved in unwinding their involvement in garnishment of wages and/or bank accounts scares me.

We'll see what happens. At least I am off the hook for the short term while they process the paperwork that was sent to them.

quote:

Thanks...I am ready to withdraw from the window ledge for now :-)

It's not the amount that bothers me. It's that:

1) I have proven I don't owe it (Although this has yet to be "officially" accepted by my state)

2) If I pay it so I don't get threatening notices, it will be damn difficult to get it back, and

3) If I don't pay it, the bureaucracy involved in unwinding their involvement in garnishment of wages and/or bank accounts scares me.

We'll see what happens. At least I am off the hook for the short term while they process the paperwork that was sent to them.

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
PATIENCE. I have had a small business for about forty years. I deal with this sort of thing every six or so years. The IRS is very slow. The typical time it takes is about one year. I bring the demand letter to my CPA and he handles the issue. I do what he tells me to do. It is generally resolved. My CPA usually laughs and shakes his head when I give him the letter.

quote:

Originally posted by ZSMICHAEL:

quote:

Thanks...I am ready to withdraw from the window ledge for now :-)

It's not the amount that bothers me. It's that:

1) I have proven I don't owe it (Although this has yet to be "officially" accepted by my state)

2) If I pay it so I don't get threatening notices, it will be damn difficult to get it back, and

3) If I don't pay it, the bureaucracy involved in unwinding their involvement in garnishment of wages and/or bank accounts scares me.

We'll see what happens. At least I am off the hook for the short term while they process the paperwork that was sent to them.

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
PATIENCE. I have had a small business for about forty years. I deal with this sort of thing every six or so years. The IRS is very slow. The typical time it takes is about one year. I bring the demand letter to my CPA and he handles the issue. I do what he tells me to do. It is generally resolved. My CPA usually laughs and shakes his head when I give him the letter.

This made me smile. SOP!

Mmm, if you entered the amount on the wrong line then proceeded as if it were the right line then the state is right and you are/were wrong. And of course the correction/explanation is still in process, slowly.

This is not tax advice, this is a question, follow the recommendation of your paid credentialed professional.

Is it the correct procedure for your state to fix this problem of an incorrect entry to file an amended return that will redress the incorrect entry by moving it to the correct line?

Perhaps the govt will remain shut down so those audit percentages will be zero. Personally, I don’t buy audit insurance. The auditited percentages are less than one percent. The IRS counts an inquiry about a single number on your return as an audit. Therefore, the percent of full compliance audits is a fraction of that fraction already listed above in Sailor1911’s post.

It’s like buying the additional insurance on a TV at the register. It’s generally not a good deal. Perhaps if you claim EIC you could justify some protection. Claiming EIC substantially increases your audit chances.

All,

It's RESOLVED! The state of Virginia has accepted my proof that I do not owe the extra taxes, and has furnished me letters stating so.

Sigcrazy7 - you are correct that the percentage of returns selected for audit are very low, but that is not what happened in my case. In this case, my State (Virginia) simply stated that there was an error in my return, and was disputing an entry on a single line of my state return. So it was not a full audit. I will bet the percentages of this happening are much higher than random audit selection.

At any rate, I am very happy with the Tax Audit protection service, all I had to do was scan and furnish documentation, and they took care of the rest - it just took a few iterations to get it done.