Before considering the buying of any insurance product like an audit protection insurance, you need to know what and why you’re buying it. The insurance may not totally protect you from getting audited, as nobody can stop you from getting audited. IRS has the right to audit anyone with questionable tax payments and it happens in random.
When you buy audit protection insurance, you aren’t protected from being audited. It’s similar to buying identity theft insurance, where it doesn’t prevent your identity from having to be stolen, but it can make the cleanup process faster and simpler.
Audit protection is an added service offered by few tax filing companies. They guarantee that a reputable tax professional will assist you in communicating with IRS. They also help you create response letters, which helps you deal efficiently with the audit.
Will the Audit Protection Insurance Really Help You?
As much as you like to play with government officials, the IRS is apparently reasonable in dealing with it. It sends audit letters in English and tax jargons that exactly pinpoint what the IRS needs. In many instances, those undergoing audit need to send their personal records, which include business records, receipts for rental houses, and the various forms to fill out the taxes.
If you have great records, the audit mustn’t end with a great deal. The audit may unveil a controversial deduction, which they decide you owe more money, but if you have good records to support it, it should justify the reason for the audit. The only way you can maintain good records is to work with a bookkeeper and allow her to maintain it all year round.
Certainly, the draft letters from audit may pose great value on your business but having great records can duly support you more than the audit protection insurance will. Generally, you can spend more money on a bookkeeping software than spending money for audit protection.
Must Anyone Consider Audit Protection?
Audit insurance means nothing if you have simple taxes and forms to file and accomplish. But for those who take advantage of their tax accounts, have many businesses, and invest in MLPs must have a huge volume of records. Even if you have great records, they need to do some explaining to the IRS and an audit protection insurance may help.