What Is Audit Protection & Is It Worth It?

While audits are relatively rare, occurring in just 1 out of every 500 (or 0.2%) of tax returns, higher net worth individuals with taxable income exceeding $200,000 are more likely to be audited.

Because no one wants to be audited, the idea of getting audit protection in the event that the IRS wants to take an in-depth look at your tax return can be desirable. But what is audit protection in practical terms, and is it worth paying extra for it when you file?

The short answer is that it depends. Keep reading to find out more.

What Is Audit Protection?

Though the specifics can vary, generally speaking, audit protection helps you navigate the next steps if you get a dreaded notification from the IRS that your tax return is under review.

One of the first things to understand when you’re researching tax-related topics such as “what is audit protection,” is that audit protection is not the same thing as an audit defense. While audit protection is a useful service for preparing a defense to an audit and getting all your ducks in a row, so to speak, it’s not as robust as full-blown audit defense.

3 Benefits of Audit Protection

Though most audit protection services don’t provide the same level of legal support as an audit defense, they can provide valuable benefits, including the following:

1. Peace of mind: Knowing that you have someone providing taxpayer support if something goes wrong can alleviate a substantial amount of stress.
2. Experienced advice: Many people panic (understandably) when they receive an audit notice. Having access to someone familiar with the ins and outs of IRS policies and procedures can be invaluable.
3. Cost and time savings: No matter the circumstances, an IRS audit is going to require you to collect and provide a long list of financial documents, receipts, and other types of financial information to an IRS representative. This can be difficult to gather on your own, but someone with experience in audit protection can simplify this process and get the required evidence to support an inquiry.  

What’s Included (And Not Included) in Audit Protection

When people inquire about “what is audit protection,” there can sometimes be confusion about what audit protection really entails and what it’s limits are. Further, the term “audit protection” can mean different things, depending on who is offering the service.

In general, audit protection will inevitably include:

• Providing a detailed account of the audit process
• Responding to letters and notices from the IRS
• Reviewing your tax documentation
• Helping you prepare a strategy for handling the audit

However, depending on whether you purchase audit protection from a tax preparation software service like TurboTax or H&R Block, the add-on fee might not provide as much service as you think it does.

A basic, out-of-the-box audit protection service will not provide the following:

• Legal representation: Even though audit protection will likely include a specialist acting on your behalf in responding to letters, it does not include legal presentation in IRS proceedings or in court to defend your tax returns.
• Preventing an audit from happening: purchasing audit protection in advance does not have any bearing on whether your return for that tax year will be audited.

The Bottom Line

The level of service you receive with audit protection varies, so there’s not necessarily a single definition that satisfactorily answers “what is audit protection?” Though there is variation in the meaning of “audit protection,” the key takeaway is that most automated or software-oriented audit protection programs will not provide legal representation or specialized advice.

Working with the professionals at Levy & Associates, Inc. can offer a more comprehensive audit defense solution. Call us at 313-447-1704 or contact us online to learn more.