Wednesday, January 15, 2014

Turbo Tax Audit Defense Coverage

Over at Bogelheads we read: Turbo Tax Audit Defense Coverage

Postby pshonore » Tue Jan 14, 2014 10:25 am
Just wondered how many, if any, folks are considering buying this from Turbo Tax. It evidently covers someone advising you and going to an audit in your place if your return gets audited. Cost is $39.99. Probably not necessary with a simple 1040 (or below) but if you've got a complicated Sched C or a K1 or other funky stuff, it might be worth it if you get audited. I don't believe they will pay any penalties or interest resulting, unless there was a program error. 

TT also has a download called the Audit Support Center which discusses the various type of audits (Automated Adjustment Notice - CP 2000 letter, Correspondence Audit, Office Audit and Field Audit) and how to deal with them. Thats free to download and is interesting

Re: Turbo Tax Audit Defense Coverage

Postby serbeer » Tue Jan 14, 2014 5:27 pm
I never purchased it. But never been audited either so cannot comment on how useful it could be. The thing is, if I filled out my own taxes all my life, I think I should be able to handle my own defense if something went wrong. I would have to give all the documentation to whoever represents me, so why not to IRS directly?

Also, I don't see what precludes me from paying for presentation later if I decide I need it after all. My tax return is not simple, but neither it is overly complicated: investments, rental (was hard the first year when depreciation had to be set up but now no more complicated than the rest), ESPP, and W2s. In short, this coverage is special form of insurance that covers representation fees, not actual losses like most other types of insurance, so basically insures some of my time I figure, while still means I have to be involved.

Re: Turbo Tax Audit Defense Coverage

Postby Kevin M » Tue Jan 14, 2014 9:57 pm
I've bought it every year for several years for my returns, but I do returns for others and help others with their returns and don't usually recommend it since their returns are much simpler.

I have had four correction notices over the years (IIRC), two covered by Audit Defense and two not. One that I handled myself was easy; one was kind of complicated, but I probably would have had to do just as much work figuring it out with help from Audit Defense. For one issue covered by Audit Defense, I actually had to convince the AD rep that I was right about the way I handled something on my return (after consulting with his colleagues he eventually agreed).

One nice thing about AD is that if extended correspondence with the IRS is required, they handle all of it. One of my issues covered by AD was minor, but for some reason it required multiple go rounds with the IRS (they told me this is not uncommon). I'm sure AD saved me time on this one.

The tax laws are not clear cut and without ambiguity. There are enough possibilities in my returns for disagreement that paying the extra $40 each year is worth it to me. For others whose returns I do or help do things usually are straightforward enough, and the chance of an audit low enough that I don't think it's justified.


Re: Turbo Tax Audit Defense Coverage

Postby Bracket » Tue Jan 14, 2014 10:22 pm
I buy it every year as well. I don't think my taxes are particularly complicated but Turbotax tells me every year that based on my income alone I have I forget the number but some higher than average chance of being audited. I figure it's cheap enough to buy just in case. According to them it's much cheaper to pay them the small fee than to hire someone to represent you after the fact. I have no idea if this is true.

Of course a few years ago I got an "audit" letter on my state taxes saying I failed to file and all that. I totally forgot I had paid for Audit Defense and just called them myself and sent in the forms needed to prove that I did not have to file. (It was a living in Maryland, working in virginia situation and so I did not need to file in the first place, their error). Anyway I hope to never need audit defense in the future and to therefore never learn whether or not it is worth it.

1 comment:

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