Audit Defense may not be worth the price

Just a quick note to let you know the Audit Defense service offered by TurboTax in recent years is probably not worth the price. It’s run by a company called TaxResources, Inc., and they say they’ll represent you to the IRS in case you should have any problems with your return, for the low price of only $39.95.

Someone close to me got to find out exactly what they give you in return for that $39.95 “peace-of mind” fee, when an irregularity popped up on their tax return. They’d made an accounting error, found it out, wanted to report it to the IRS on their own, but contacted these folks because, after all, they did pay for the service.

In the meantime, the IRS also found out about the error and contacted them. This is where the Audit Defense service should have shined. Instead, my contact got the run-around. The Audit Defense team weren’t willing to help them in a timely fashion, didn’t want to contact the IRS on their behalf like they should have done, and only ended up helping them — if you might call what they got help — after several written requests. In the end, my contact lost out on precious time, got extra stress they didn’t need, and will need to pay the IRS additional penalties.

It looks to me like the Audit Defense people failed on three of their basic promises: they didn’t step in right away to deal with the IRS, they didn’t handle the entire tax audit, and they didn’t keep IRS penalties as low as possible.

The name of the employee who “helped” my contact with their IRS audit was Joe Schricker, and the company’s name again is TaxResources, Inc. The service is advertised as Audit Defense on TurboTax, and my advice to you is not to get it.

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27 thoughts on “Audit Defense may not be worth the price

  1. John says:

    I have used TurboTax to carefully fill my returns in 2009. I checked my return around 10 times before filing it. After all rebate was pretty big. But everything was legit. And yes, I’ve got audited. I have not used Audit Defense at that time but honestly I don’t think it would help.
    I presented all receipts and paperwork that IRS requested. Regardless of that their statement was that the numbers still don’t match their records, please send a check for 4 grands. No other reason whatsoever. Since then I’ve got a strong feeling that they select people whose return stands out of average and make you pay to make you even. I bet if they find a mistake in your return then they make you suffer. So, whatever is presented they will ask you to pay. Therefore I am not ganna use Audit Defense even after Audit. Besides that I am pretty satisfied with TurboTax itself.

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  2. Rusty says:

    Well, I’ve purchased Audit Defense a few times my S-corp returns, but have never needed representation. Never been audited. Never even gotten a question from the IRS on any return, and I’ve been doing my own taxes with Quickbooks and taxes with TurboTax for over 20 years now. After reading this, I wonder if allowing Audit Defense to represent you is a good idea. However, $45 might not be a bad investment if you just use them for advice, on the front end of a tax problem. In other words, contact them and have a rep assigned, and then pick their brains for the best way to handle the situation. You might get all the information you need to resolve the issue on your own, without further Audit Defense involvement, and without having to hire other representation. If your taxes are sufficiently complex that an audit is even a worry for you, $45 is a piddling amount of money anyway. If it saves you even one hour of tax attorney or CPA time, then you’ll get a 300% return on your investment.

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    • Ronald Harris says:

      I used tax resources when I was notified that IRS was doing a paper audit on my return. I have no complaints with their service and actually got additional money after they contacted IRS on my behalf.

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  3. Chuck says:

    lessons i learned: if the IRS says you owe them money and you cannot immediately convince them that you do not, then PAY the IRS the money! You do this in order to avoid compounding interest and penalties. After you pay what they ask, the “meter” stops and you now have time to get your ducks in order and convince them otherwise; if you succeed then you will get a refund; if you don’t succeed then at least you minimized your expense. I was audited by a robotic-like “numbers person” whom I found impossible to reason with, so I paid the exact amount he demanded. About a year later my returns were reviewed by others in the IRS and I received in the mail a refund of $1,700. I don’t know if Audit Defense is worth the expense but I do know you can mitigate the $$ impact on yourself by timely paying what they ask for, and then try to recover it/plead your case, later.

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  4. Jetta Smith says:

    Be careful what you read on the internet. I have used Audit Defense for several years. I had rental houses and got audited two years in a row. Tax Resources represented me and went to the audit. The company is excellent and well worth the prices. So this article is bogus or based on one person bad experience, which I am sure is more to the story!

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  5. Jean says:

    I think this is another instance of “Just because someone said it on the Internet it is true.” Most of you don’t know what you are talking about! TaxResources is a company of high integrity and hires only professional people with proven experience and credentials. This is not one of those Mom and Pop shops that tell you they can work a deal for you. They do not prepare tax returns; they specialize in providing audit defense and they will handle your case all they way from underreporter notices through filing a petition in Tax Court and representing you in Appeals. Where else are you going to get that kind of representation for $39.95? Regardless of the price, you get top notch service and personal attention. All of the representatives are either enrolled agents, CPAs or attorneys. They do an excellent job of representing their members. The IRS is familiar with TaxResources and respects them for their work product; they know the substantiation received from a taxpayer represented by TaxResources will be high quality. Of course, not everyone is going to be happy with TaxResources because they may actually have to pay additional tax if they made a mistake or if they cannot provide documentation to support deductions claimed on their return. As with most things in life, you are going to hear the most from unsatisfied customers. Hopefully you will never need it but if you want good audit defense, you can depend on TaxResources. It will be one of the best purchases you have ever made if you do need it! TaxResources delivers on its promises.

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    • >> “Just because someone said it on the Internet it is true”…

      I think that line applies just as well to what you’re saying. Your comment is such a blatant ad/defense for TaxResources that I can’t help thinking you either work for them or they’ve paid you to do this. So sad to see them try to do damage control with this sort of fakery, when they should have provided proper customer service in the first place.

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      • Marcus says:

        We are STILL fighting our audit and I still say the Tax Defense hurt things more than helped. We found out recently that 50% of the documents we sent to the Tax Defense rep were never sent to the IRS. He didn’t have them and the Rep never said she sent them. So the IRS sent us yet another letter to send those documents. That was the only reason we found out.

        Meanwhile the IRS is running up our CPA bill that we were forced to hire since Tax Defense didn’t do anything for us other than get up with a $20,000 bill and denial of EVERY SINGLE one of our deductions. I’m not talking about frivilous deductions. I am talking about deductions for CE education, license fees, insurance, signs, business cards, fees paid directly to Re/Max for desk fees,etc. They denied EVERYTHING!

        Now we are into our CPA for $5,0000 more and we still are not even at t he appeal stage. The IRS agent is just running out the clock and probably figures if we have to pay enough then we will give in and pay the bill.

        Anyone who is considering Tax Audit Defense, DO NOT DO IT. Hire a CPA from day one. I 100% believe that if the clowns at the Audit Defense didn’t mess things up, we would have already been done with this.

        They are a waste of time and money and will dig a deeper hole that you will have to climb out of.

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        • Marcus says:

          PS our $14,000 tax bill is now $20,000 from penalties as interest for the 2 yrs. they audited us for now add on the $5,000 for the CPA and we are at $25,000 for this audit.

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      • Sheila says:

        I recommend that no one bother purchasing the so called audit defense from TaxResources. I was audited this year from a few years ago (when I purchased the “audit defense” )and after multiple attempts to get assistance with the matter, I was essentially told there was nothing they could do to help. I will write about this as often as I think about it to warn others of their scam.

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  6. Charlie says:

    My experience was fine. I was contacted about an issue several years ago by the IRS and they wanted another 16K in taxes. I didn’t immediately tell audit defense (be sure to do that), but Joe Schricker still handled it. It took some time (the IRS delayed, not Joe), but the problem was ultimately resolved and I even got a bigger refund. I buy this every year.

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    • Marcus says:

      Consider yourself lucky. We have every single receipt and the IRS is 100% denying it and on top of the $14,000 they are charging me, they added 4K in penalties. I had to hire a CPA to handle the appeal and that cost me $2,500 and he said he has never seen records so complete and there is no reason why it was denied. Straight up denied! EVERYTHING! License fees, associations that are MANDITORY that I belong to, manditory insurance, desk fees ($1,200 a month) that are manditory for me to work at Re/Max, referral fees, business card receipts, for sale signs,etc. ALL OF IT WAS 100% DENIED!!!

      Turbo Tax Audit Defense was the biggest mistake I made because if I would have hired a CPA from the beginning, it would have never cost me this much.

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  7. Marcus says:

    DO NOT GET AUDIT DEFENSE! I was audited and when I called Audit Defense I thought I would go see a local CPA. Nope, it was a person in California and then another and another. By the 5th person I spoke to, I finally reached the person who was going to help me.

    I was supposed to meet with a man and she told me to ignore it and she would contact him and discuss it over the phone. That auditor asked for mileage logs, appointment books, daily schedule,etc. Then I ended up with a new auditor. This time a woman. She wanted oil change receipts,etc Then it was more calls and bank statments, etc. In the end the IRS decided to disallow ALL OF MY EXPENSES!!!!! I have receipts for everything! I have proof. The auditor said “I don’t believe that is all she mad”. WTF??? I get checks and have a 1099!!!

    I have been in business for 2 yrs and he said “well you have to make a profit 2 of 5 yrs but I have only been in business 2 yrs!

    So now I owe $14,000 and Audit defense said ” I am shocked”. They now want me to appeal because they discussed it with their team and said it makes no senes and think I have a good case.I am afraid to appeal it because then the IRS will start to lick their chops over my past taxes. If they just can say they won’t accept any of these write off’s what is to say they won’t disallow other deductions from previous years?

    I should have gotten a CPA to go with me to the first appt. and then this mess would be over and wouldn’t have been dragged on for months and I wouldn’t have had to pay and still is not over.

    Makes me sick that I have worked and busted my behind and the IRS can screw me like this and force me to pay money we just don’t have.

    Do yourself a favor and hire a CPA and do not use Audit Defense.

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  8. Penny says:

    I had a terrible experience with Audit Defense. After dragging out the process for over a year and letting it progress from stage to stage, their accountant told me, “That’s it, I won’t be representing you anymore. Good luck in tax court,” and just walked away.Then I had to take my file to a private accountant who charged me thousands of dollars to undo the damage the Audit Defense accountant did. If that’s not a scam, what is?

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  9. William M. says:

    I have to say that I can’t imagine a company charging 39 dollars and giving you top notch legal representation. I’m looking at my LLC attorneys last phone call for me, of .70 and the charge was $105. There simply is no way they can represent every client with full attention. I don’t see it. By the way, informative blog.

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    • They’re not representing everyone. The point of charging a lot of people $39.95 is so they can give their full attention to the few that actually get audited.

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    • When I signed off on my 2011 return, I signed up for Audit Defense. With in 10 days I received a letter from the IRS for 3 years of tax audit. Seems the IRS thinks I owe them $27,000. Consider I am an unemployed special education teacher and I barely make that much. I was wondering if this third party is getting some kind of kick back. Since I paid $59.00 for the Audit Defense for the 2011 tax year, they told me I would need another $3000 or so to represent me for 09 and 10. I asked what I would get for that and they were very vague in their answer. My question to all of you is: Do I pay the extra money or do I take that money and go to a real live tax lawyer, which would probably cost the same.

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  10. Jared says:

    thank you, almost bought this. I lost a W2 from someone who paid me and wanted to be safe. Instead I requested the W2 again and will amend my tax return once i receive it. If I receive a W2 from a company and dont report it does the gov automatically know? Kinda wondering if I have a month to add it.

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    • E.P. says:

      Jared, you can’t seriously be thinking that the govt doesn’t receive all of your W2 forms. Of course they do. That is the foundational data point.

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  11. Brian Davies says:

    Several years ago a communication breakdown led to a major tax demand etc. by IRS. I was liquidating a foreign shares portfolio and the proceeds were notified to the IRS. But I was not notified and the IRS treated the sale as net not gross. I contacted Audit Defense and they did me proud. Sorted it all out over a few weeks and ended up reducing taxes owed and clearing me with IRS.

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  12. Chainsaw says:

    A few thoughts:

    1. I’ve never bought or used TT’s Audit Defense. I’m thinking about it this year, however, insofar as we just spent scores of hours in 2011 complying with an IRS audit for previous year taxes. Not an experience I’d ever want to go through again — at least alone. Hence the search for objective “reviews” of the service.

    2. With all due respect, almost all the complaints posted online about TT’s Audit Defense don’t actually pertain to audits. They’re about people getting bills from the IRS for past due taxes, etc. Apples and oranges. An IRS audit is a particular animal, and I doubt the kinds of services many people are griping about even fall within TT’s terms of service.

    3. I don’t doubt TT will unwittingly hire a crooked rep from time to time. The odds favor it. But it’s about how TT deals with the mistake that matters.

    4. I also don’t doubt that TT will unwittingly hire a crappy rep from time to time. But know this: the IRS is also full of crappy auditors. The woman who audited our return in 2011 knew less about the tax code than did me and my wife (we’re both attorneys with a reasonable law-school background in taxes.) Luckily, this IRS lady made almost as many errors in our favor as she did against us. In the end, we decided a bush in the hand was worth two in the bush and signed off on her findings. But had it gone worse, we would have faced many thousands in legal fees to start a frustrating — and quite possibly hopeless — battle the IRS.

    5. The only sure way to end all this is to simplify the tax code significantly. But with morons like Herm Cain and Steve Forbes carrying the tax simplification banner, and with the multi-billion dollar tax preparation industry (including folks like TurboTax) and the one-percenters who benefit enormously from the current tax code aligned against tax reform … well, don’t hold your breath.

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  13. Dan says:

    I too had a horrendous experience with audit defense. Very incompetent representative in my opinion by the name of Ed Matta out of Santa Maria. After he had me do extensive research to get documents together that they “needed”, I wasted hours of my time before he said he was mistaken and they were irrelevant. He forgot to take files to the audit, lost files, and when I complained about the service I was receiving he said it wasn’t a big deal that he “only wasted my time” and that I should be satisfied that he “eventually” gave me accurate information. He said the tax law is technical and I should understand that. He was very apathetic, very incompetent and a waste of time and money. I let him go and am handling the audit on my own. Stay clear!

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  14. Julie says:

    Oh, gee. NOW I find this. We’ve been paying them for years, and just paid again. Will definitely have to rethink it for 2012.

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  15. Gaius Gracchus says:

    Thanks for the post. TurboTax strikes again. Pretty scammy of them to offer such a useless service and then not deliver.

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  16. Brian says:

    Agree all the way. They gave me a FELON to be my representative. I only found out when the IRS refused to deal with him.

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