I've had my fair share of hassle (putting it lightly) with taxes. If you're self-employed or have multiple deductions or business expenses, filing taxes can be stressful enough without having to deal with the dreaded audit.
Tax audits are rare. But a simple mathematical error can trigger attention from the IRS, and your chances of getting audited creep up if your taxes are more complex. TurboTax Audit Defense is a paid add-on service that eases the pressure by offering representation and communication with the IRS.
But is this service really necessary? Find out with my full TurboTax Audit Defense review.
This article will tell you:
- How TurboTax audit protection works.
- All the tax audit services, pros and cons.
- If the TurboTax MAX benefits are worth it.
Read more:
What Is TurboTax MAX?
TurboTax MAX is an optional add-on package for TurboTax users looking for an extra layer of protection and assistance. But let me be clear — this extra personalization is best suited for those with more tricky taxes, not the standard W2s.
One of the standout features of TurboTax MAX is its Tax Audit Representation service. If the IRS selects you for an audit, MAX swoops in and handles all the back-and-forth communication on your behalf.
MAX also comes with Full Identity Protection to shield your personal information. Here's what's included:
- Full Identity Restoration: If your identity gets snatched by a cyber-criminal, an IDnotify specialist can quickly work towards restoring your identity.
- Identity Theft Monitoring: An IDnotify specialist can step in to help shield your personal identity if there's any sign of suspicious activity.
- Identity Theft Insurance: MAX provides insurance coverage to reimburse stolen funds and cover legal fees caused by identity theft.
You also get Priority Care, where a specialist can offer a helping hand, even drawing on your screen to guide you through the tax process.
Need help with your taxes? Check out our picks for the top tax strategist services for physicians.
What Is TurboTax Audit Defense?
TurboTax Audit Defense is one of the main features included with TurboTax MAX — it's like having a tax expert stand in your corner if the IRS comes knocking. It's your shield against the uncertainty of an audit, offering professional representation and communication with the IRS on your behalf.
Note: Audit Defence will only activate if you add TurboTax MAX before you complete your tax return.
How Does the TurboTax Audit Defense Work?
Let's say you receive that dreaded letter from the IRS, signaling the start of an audit. Instead of going into panic mode, you get some relief knowing that TurboTax Audit Defense will handle all communications and develop a strategy tailored around you.
TurboTax Audit Defense offers negotiation services with the IRS or State, including appeals and pre-litigation reviews. Your Audit Representative aims to ensure your rights are protected throughout the process and settlement will only be reached with your final approval and consent.
Now, I'm the sucker who pays extra for luggage out of fear my carry-on bag is slightly oversized (it's usually fine). But even I'll admit that paying extra for Audit Defense is a stretch given less than 1% of tax returns are selected for tax audits each year.
If you're already using services like TurboTax, you're chances of messing up are already reduced. And if your taxes are relatively straightforward, the odds are even lower. So, who's in the danger zone? Your chances of getting audited can increase if you're self-employed or a high-earner.
While the odds are low, these are some common ways to land yourself a tax audit:
- Inconsistent income reporting: Large fluctuations in income from year to year can raise red flags for the IRS.
- High deductions: Claiming unusually high deductions compared to your income bracket may prompt closer scrutiny.
- Self-employment income: Self-employed individuals are more prone to audits due to the complexity of deductions and expenses.
- Large charitable contributions: Claiming substantial charitable donations without proper documentation can attract attention.
- Home office deductions: Claiming deductions for a home office requires careful record-keeping to avoid audit triggers.
- Failure to report all income: Forgetting to report sources of income like freelance work or investment gains can lead to audits.
- Claiming excessive business expenses: Business owners should be cautious not to overstate deductions, especially for personal expenses.
How Much Does TurboTax Audit Defense Cost?
Claiming certain deductions, not reporting all your income, or reporting small business losses are all examples of potential red flags for tax auditors. That's where TurboTax Audit Defense comes in, but how much does this peace of mind cost?
Purchasing Audit Defense through TurboTax MAX usually costs $49.99 per filed tax return. That's the standard rate to ensure your tax filings are covered by expert representation and support. Sometimes TurboTax sweetens the deal with a 10% discount, bringing the cost down to $45. So, keep an eye out for any special offers or promotions.
TurboTax Max Audit Defense: Pros & Cons
Whether TurboTax MAX is worth it for you ultimately comes down to your individual tax returns and circumstances. Here's a rundown of the pros and cons to get a better idea:
TurboTax MAX Benefits
- Peace of mind: Knowing that Audit Defense has your back can be a huge weight off your shoulders, especially if you're more at risk of getting audited. They're there to assist you, negotiate, and handle all those daunting IRS documents on your behalf.
- Self-employment safeguard: If you're self-employed, you probably know how complex tax deductions can get. The IRS is more likely to scrutinize sole proprietors, especially those with hefty incomes, to ensure everything adds up. TurboTax MAX provides extra protection and assistance if you find yourself under the IRS microscope.
- Communication with the IRS: One of the most valuable aspects of TurboTax MAX is its communication services. Dealing with the IRS can be overwhelming, especially if you're not well-versed in tax codes. From sending out letters to negotiation through appeals, they can save you time, energy, and a headache.
TurboTax MAX Drawbacks
- Low chances of getting audited: The likelihood of being audited plays a major role in whether TurboTax MAX is worth the investment. Less than 1% face audits and many are targeted at high-earners or corporations. If you have a simple tax return, especially one filed with assistance through an online service, your chances of being audited are very low.
- Membership exclusions: Are you part of a large business with gross receipts exceeding $5 million? Do you have more than 10 partners, stockholders, beneficiaries, or members? If either or both apply to you, the TurboTax MAX's Audit Defense service is off the cards.
- Audit Defense limitations: If your case escalates to tax court or involves legal complexities beyond the audit, TurboTax won't save you from having to pay extra for legal assistance. They also won't help with local, federal, or state return amendments, and there's no support for collection notices for undefended audits.
Is Turbotax Max Worth It?
Determining if TurboTax MAX is worth it hinges on your tax complexity and comfort level. MAX offers Identity Protection, Priority Care, and tax expert guidance. While these extras come with a price tag, they can streamline your tax process. With features like Audit Defense, you also get added support during IRS audits.
Is TurboTax Audit Defense worth it?
Your audit risk is low if your taxes are relatively simple — 1099s or W2s with standard deductions probably won't face much scrutiny from the IRS. Audits often stem from minor errors that can be avoided, like forgetting to add that extra zero or miscalculating your deductions.
Whether Audit Defense is worth it depends on your risk tolerance and the complexity of your tax filings. If simplicity reigns or you're confident in your reporting accuracy, the added expense simply isn't necessary.
FAQs
How much is TurboTax Audit Defense?
TurboTax Audit Defense typically costs $49.99 per filed tax return, offering peace of mind and expert assistance during IRS audits. Occasionally, discounts are available, reducing the price to $45.
Does TurboTax Premier include Audit Defense?
No, neither the TurboTax Premier nor Deluxe include Audit Defense by default. However, you get access to the Audit Risk Meter which scans your tax return for audit triggers to see if your risk is high or low.
You can add on Audit Defense as part of the TurboTax MAX package, which provides comprehensive protection and assistance during IRS audits.
How to contact TurboTax?
To contact TurboTax, sign into your TurboTax account online. Once logged in, type “Contact Us” in the Search bar and select the Contact Us button. From there, you can post your question to the community or talk one-on-one with a TurboTax Expert. If you're using the desktop version or can't sign in, visit the TurboTax website and follow the prompts to ask your question.
You can also use the TurboTax customer service number: 800-624-9066. Or contact the TaxResources Tax Audit Defense Customer Service Department at 877-829-9695.
