For most Americans, tax time either means paying the Internal Revenue Service (IRS) big money or getting a refund in the mail. No matter where you fall in the spectrum, an audit can be a scary thing, especially given the ramifications.
That’s why it’s important to file your taxes accurately, whether you do it yourself or find a software or company that will guide you. A few minor errors could trigger an audit, but most of us are worried about the worst-case scenario happening to us.
Research shows that those fears may be unfounded, especially given how many millionaires were audited back in 2022 (for 2021’s taxes). The odds of a millionaire being audited were only just above one percent.
The good news is that most tax software and even paid tax preparation come with audit defense. It’s the company's way of assuring you that if a number gets transposed or your taxes get audited, you’ve got a resource you can rely on.
TurboTax is one of these tax preparation software companies that offers Audit Defense to protect its customers. But if audits aren’t such a huge threat, is it worth the expense?
Our guide includes everything you need to know about TurboTax’s Audit Defense, including what it covers and how much it costs. We’ll also discuss your odds of getting audited, which are pretty slim for the average American.
Are you ready to answer the question, “Is TurboTax Audit Defense worth it?” Let’s get started!
An Introduction to TurboTax
TurboTax has established itself as one of the best free tax software programs out there, especially if you don’t have a complicated return. This tax preparation company can help you file your annual return by choosing from one of the many editions available.
If your return is simply entering a W-2 and calling it a day, you might qualify for the TurboTax Free Edition. Both federal and state taxes are free to file so you will only have to pay if you owe the IRS or your state.
More complicated returns require priced plans, especially if you have to append several additional forms, called “Schedules,” to your return. Instances where you might need to do this include getting married, having kids, buying a house, purchasing or earning income from a rental property, as well as foreign earned income.
While many people choose to do their taxes themselves, wading through instructional forms and documents can be a hassle. Paying a software program or even a tax preparation specialist to take care of it all can be well worth the price.
TurboTax features a user-friendly interface that operates like an interview, guiding users through a set of questions about their life and income to identify deductions and make suitable choices. Although it offers various products to cater to users' requirements, the free version is only applicable for basic tax returns.
Plans and Pricing
TurboTax has three basic plans in addition to the free version. These include:
- Basic: This plan works best for simple tax returns. If you earned income through a W-2 and a 1099 gig, you might get away with the Basic plan. This plan starts at $59 for filing federal taxes and $49 for filing state taxes.
- Deluxe: If you want to claim deductions on your taxes, plan to pay for at least the Deluxe tier. This one is the most popular, likely because it also incorporates an audit risk meter.
- Premier: Those with investment income, including rental property income, will likely need to pay for the Premier plan. It offers the most guidance for more complicated situations, even if that means just adding in different types of income and investments.
No matter which plan you choose, TurboTax offers free phone support to help you through the process. However, the Premier plan is the only one that gives you access to live chat support.
As you might imagine, prices increase from the Basic to the Premier plan. While you might feel like saving money with tax preparation, sometimes paying a bit more for a version that fits your needs can be well worth the frustration you avoid.
If you’re someone who deals in 1031 exchanges or even has several types of IRAs, the Premier version may not be robust enough to handle your situation. In these instances, most taxpayers visit a trusted tax preparation agent and leave the filing to the experts.
What is TurboTax Audit Defense?
TurboTax Audit Defense is part of the MAX services, which cost $60 on top of your tax preparation fees. It’s important to note that this service is a flat $60, whether you file a basic or a more complicated return.
You should also know that if TurboTax can’t connect you to a tax professional, they will refund your money. That’s all well and good, but $60 doesn’t go very far if you’re facing an audit and need representation.
So what does Audit Defense do? Well, it guarantees that a TurboTax professional will defend you in tax court and assist with your audit.
In practice, this means communicating and negotiating with the IRS on your behalf. You still retain the right to have the final say, but TurboTax’s experts will do the leg work for you.
In addition, TurboTax Audit Defense includes identity theft protection, loss insurance, and restoration assistance. These services typically come at an extra cost if you were to purchase them through another source.
TurboTax’s Audit Defense includes developing a strategy as well. For those who have never been through the audit process and want to make sure they’re not being taken advantage of, this expert guidance can be well worth the cost.
At the same time, TurboTax Audit Defense does exclude some services. Keep reading to find out if paying $60 for this service is worth the cost.
Is TurboTax Audit Defense Worth It?
The short answer to this question is: no. The more appropriate answer is: it depends on your situation.
TurboTax’s Audit Defense works well for those who are at risk of being audited. You might argue that could be anyone who pays taxes, but the odds are that only one in every couple hundred people gets audited.
In addition, most tax preparation services develop their software to be as straightforward and succinct as possible. If you don’t have issues entering your information (as long as you enter it correctly), it’s not likely you’re at risk for an audit.
Determining whether or not TurboTax Audit Defense is worth it can also be done by considering what is not covered by the additional cost. Audit Defense does not cover:
- Legal representation if your case goes to Tax Court
- Legal aid for alleged or actual tax fraud or associated crimes
- Amendments to federal or state returns
- Bookkeeping services
- Collection notice assistance
We’re no legal experts by any means but if you’re concerned about an audit, choosing a professional with whom you work well can be a better alternative than paying $60 for TurboTax’s Audit Defense. Licensed tax attorneys make a living from helping consumers like you and me so they have a bit more skin in the game when it comes to advising and defending clients.
Advantages and Disadvantages of TurboTax Audit Defense
Contrasting the benefits and the costs of TurboTax Audit Defense can help you determine if this service is worth the cost. Here are a few considerations to think about.
- Peace of mind that you’re protected in case of an audit
- Affordable pricing for what could potentially require thousands of dollars in fees
- Guidance during the audit process, including negotiations
- Also comes with identity theft monitoring, loss insurance, and restoration assistance
- TurboTax will correspond and negotiate with IRS on your behalf
- Even with the Premier plan, you don’t have the chance to speak to a real tax attorney
- Minimal audit protection for the price
- No guarantee of representation (only a refund)
- May not be necessary given your circumstances
- Varying levels of tax expertise for a flat rate
While TurboTax is among the best tax preparation services, there are several others out there you can choose from. You can also hire a bookkeeping service or a tax attorney, but those services are typically associated with businesses and individuals who know they are being audited.
Here are a few other tax preparation services you can take advantage of:
- H&R Block
- TaxAct Free
- TaxSlayer Simply Free
Tax attorneys offer expert knowledge when it comes to navigating what deductions you can take, how you can prove those expenses, and how to use your tax situation to your benefit. Qualified tax attorneys may even be able to identify where you’ve been losing money in the past to save you more in the future.
If you’re searching Google for “Find a CPA near me,” keep reading to find out more about what you should look for. The choice you make in hiring a tax attorney makes a huge difference, especially for something as serious as a tax audit.
What to Look For in a Tax Attorney
Should you ever need to look for a tax attorney to represent you in an audit case, here are a few things you’ll want to look for:
- Real reviews: Like any other service, you’ll want to look for attorneys that have both good and bad reviews. Ideally, they’d have more positive reviews than negative ones.
- Proper licensing: Just because an attorney says they’ve passed the bar and are legal doesn’t mean they’re telling the truth. Check with your state bar association to double-check credentials before you sign any contracts.
- Set fee structure: Tax attorneys are one of the more expensive attorneys to deal with. However, that doesn’t mean they have to hide their fees and surprise you with a huge bill. It’s perfectly acceptable to ask a tax attorney for their fee schedule, which includes what they charge for each type of service, whether it’s an hourly or flat rate.
- Free consultation: The best tax attorneys will offer a free consultation, even if that’s to preliminarily discuss your case. You should take advantage of free consultations to get a feel for the person who will be potentially representing you in court.
- Real results: Unless you’ve attended proceedings with a tax attorney, it can be difficult to prove results. However, the attorney should be able to demonstrate specifically how they can help you in your case, even if it’s in broad terms.
When it comes to tax attorneys, shopping around can be helpful to compare and contrast what services you’re getting and what the going rate is. If you ever find yourself in need of a tax attorney, trade audit panic for preparation with finding a qualified attorney who will represent you.
If you qualify for TurboTax Free, you might be able to file your federal and state taxes without paying anything. However, the Basic version starts at $59 for federal filing and $49 for state filing and pricing goes up from there based on which plan you choose.
TurboTax Audit Defense does not include legal representation in Tax Court or any assistance if you’ve allegedly committed tax fraud. Should you choose not to cooperate with the IRS and incur additional court preparations, TurboTax does not cover these expenses or support your case.
Determining how likely it is that you’ll be audited depends on your situation. As long as you complete your tax filings accurately and on-time, the chances of an audit are low.
Several other tax preparation software programs exist, including H&R Block, FreeTaxUSA, and TaxSlayer. While these programs may or may not be free as well, they offer varying coverage when it comes to tax audits.
Put Your Audit Fears to Rest with TurboTax Audit Defense
TurboTax makes it easy to file your federal and state taxes online without having to visit a costly tax preparation agent. With TurboTax’s Audit Defense, you can also pay an additional fee to gain some protection should you get audited.
However, we hope this review has calmed your fears about both audits and paying for TurboTax’s Audit Defense service. In some cases, Audit Defense might not be necessary or worth the additional cost, especially if you’re honest and certain your tax return is accurate.
We hope we’ve also shown you that tax preparation doesn’t have to be a hassle. With so many free and affordable tax software programs out there, it’s easier to find one that suits your needs.
Whether you’ve filed taxes yet or not, knowing about TurboTax’s Audit Defense can help you stay better informed for the future. Next time tax season comes around, you might find yourself in a different position with your newfound knowledge.