The looming threat of a tax audit can make filing taxes even more stressful than it already is. Though the goal of an audit is innocuous – the IRS simply wants to verify the accuracy of your tax return – the process is stressful, no matter what the situation.
Though personal audits are relatively rare, they do happen. And, it’s important to note that just because you’re being audited, it doesn’t necessarily mean you’ve done anything wrong.
However, if you do get a letter from the IRS requesting an audit, the odds are not in your favor. According to Credit Karma, a mere 3% of the nearly 1 million IRS audits in 2018 put money back into taxpayers’ hands. Contrast that to the $9 billion in extra revenue that the IRS collected from tax audits, and it’s clear that IRS’s goal is to extract money during an audit.
What Is an Audit Defense?
An audit defense is a service that represents you during an audit.
Correspondence: An audit defense representative responds to notices you receive from the IRS.
Defense: You’ll have representation at hearings and meetings to defend your federal and/or state tax returns.
Issue resolution: If you’ve been the victim of identity theft, having an expert can unravel this complicated situation and relieve your tax burden. Further, if it’s determined that you owe after the audit, your representative can negotiate on your behalf.
Fee payment: If you used tax software or hired a tax professional to prepare your taxes, another party could be liable for any fees due to errors or discrepancies.
Who Needs an Audit Defense?
Anyone who’s being audited should at least consider an audit defense. There are three reasons why we recommend this route at Levy & Associates.
1. Relieve Stress – Even if you’ve done nothing wrong, and your error was as simple as a misplaced decimal point, IRS tax examiners can be intimidating. It can take a weight off your shoulders to put the communication with the IRS into capable hands.
2. Save Time – Unless you’re a full-time CPA or other tax professional, you’re probably not an expert at providing all the documentation the IRS needs to complete their audit. An audit defense representative already has the knowledge and experience required for the process to move as quickly and painlessly as possible.
3. Ensure the Best Outcome – Trying to defend your tax return on your own is an uphill battle. We all want to pay as little taxes as possible, and a tax expert can ensure that you’ve taken every viable deductible and credit to reduce any taxes owed. When you’re face to face with an auditor from the IRS, it pays to have an expert in your corner.
Should You Prepay for an Audit Defense?
When you file your taxes, you do have an option to purchase an audit defense in advance. It’s marketed like insurance to help mitigate damages in case of a tax “accident.”
Tax preparation services will often offer an audit defense guarantee bundled with their services without charge to help you feel confident in their services and protected if something goes wrong in the eyes of the IRS.
If you do your taxes yourself using software like Turbo Tax, you can buy audit defense as a premium, add-on service. The downside is that you don’t really know what you’re getting, and if your “representative” is skilled in their craft. The service you receive might be impersonal and generic.
Because pre-paid services tend to be generic, we recommend working with an audit defense professional if and only if you get an audit.
Though an audit defense isn’t free, it can be well worth the money, especially when going head-to-head against the IRS. If you’ve received notice of an audit or need the help of an audit defense professional, contact Levy & Associates for help.